Asian Session – Dollar posts slight rebound ahead of Fed decision
March 19, 2014 7:55 am
The dollar managed to post slight gains ahead of the decision from the Federal Reserve later in the day. Still, the dollar’s trade-weighted index against a basket of currencies was near a 4-month low.
The dollar was trading at 101.56 against the yen, relatively close to 100.75 which was its low for the year. The euro stood at 1.3921 against the dollar, also not far from a recent 2 ½ year high of 1.3969 hit earlier in the month.
The Fed was widely expected to reduce its monthly asset purchases for a third time by 10 billion dollars, bringing the total down to 55 billion per month. In addition, important changes were expected with respect to its forward guidance, as a reference to an explicit unemployment rate target as a threshold for higher interest rates would most likely be dropped in favor of more qualitative guidance.
Still, even with the expected revision of forward guidance, most economists were not expecting the Fed to lift interest rates before the second quarter of 2015. The post-meeting press conference was also eagerly awaited as it would be the first by Janet Yellen as Fed Chair. Yellen’s take on recent weak economic data will be especially interesting, as she is expected to attribute economic weakness on extreme cold weather.
Pound sterling was relatively weak below the 1.66 level at 1.6597. Pound traders were eagerly awaiting the UK’s employment report for February and January to check whether Britain’s labor market was still improving.
The Chinese Yuan kept falling – even at a glacial pace – to reach around the 6.20 level. This hurt the Australian dollar slightly, driving it back to 0.9114 against its US counterpart. Overall the aussie benefited from the improved risk sentiment as the Ukraine crisis looked likely to be contained for now as neither Russia nor the West was looking to escalate the dispute with further actions. Specifically the West refrained from enforcing more damaging sanctions and Russian forces would not move into Eastern Ukraine.
This in turn hurt gold, driving it to 1351 against a high above 1390 only on Monday.
The dollar managed to post slight gains ahead of the decision from the Federal Reserve later in the day. Still, the dollar’s trade-weighted index against a basket of currencies was near a 4-month low.
The dollar was trading at 101.56 against the yen, relatively close to 100.75 which was its low for the year. The euro stood at 1.3921 against the dollar, also not far from a recent 2 ½ year high of 1.3969 hit earlier in the month.
The Fed was widely expected to reduce its monthly asset purchases for a third time by 10 billion dollars, bringing the total down to 55 billion per month. In addition, important changes were expected with respect to its forward guidance, as a reference to an explicit unemployment rate target as a threshold for higher interest rates would most likely be dropped in favor of more qualitative guidance.
Still, even with the expected revision of forward guidance, most economists were not expecting the Fed to lift interest rates before the second quarter of 2015. The post-meeting press conference was also eagerly awaited as it would be the first by Janet Yellen as Fed Chair. Yellen’s take on recent weak economic data will be especially interesting, as she is expected to attribute economic weakness on extreme cold weather.
Pound sterling was relatively weak below the 1.66 level at 1.6597. Pound traders were eagerly awaiting the UK’s employment report for February and January to check whether Britain’s labor market was still improving.
The Chinese Yuan kept falling – even at a glacial pace – to reach around the 6.20 level. This hurt the Australian dollar slightly, driving it back to 0.9114 against its US counterpart. Overall the aussie benefited from the improved risk sentiment as the Ukraine crisis looked likely to be contained for now as neither Russia nor the West was looking to escalate the dispute with further actions. Specifically the West refrained from enforcing more damaging sanctions and Russian forces would not move into Eastern Ukraine.
This in turn hurt gold, driving it to 1351 against a high above 1390 only on Monday.
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