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What's going on with dollar and yen after the Fed meeting

What's going on with dollar and yen after the Fed meeting

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Jim Anderson - Public Relations

During today's Asian trading, the dollar is getting cheaper against the euro and other world currencies at the decision of the Federal Reserve System (FRS) to lower the interest rate.

At the same time, the yen is growing after the Central Bank of Japan refrained from changing monetary policy. As of 7:22 London time, the euro was worth $ 1.1044 against $ 1.1030 at the close of the last session.

The value of the single European currency against the Japanese national currency was at the same time 119.25 yen compared to 119.62 yen on Wednesday. For the dollar, at 7:22 London time, they were giving 107.97 yen against 108.45 yen on the eve.

The ICE Dollar Index, which shows the value of the US dollar against six major world currencies, is down by 0.14%. WSJ Dollar indicator against 16 major world currencies, is losing 0.06%. Yesterday, the Federal Reserve expectedly lowered the federal funds rate by 0.25 percentage point, to 1.75-2%.

Also, the Central Bank management published updated macroeconomic forecasts. In particular, the forecast for US GDP growth for 2019 was improved to 2.2% from the expected 2.1% in June, and by 2021 to 1.9% from 1.8%. The forecast for 2020 is left at 2%.

Meanwhile, the Bank of Japan today didn’t begin to change the basic parameters of the monetary policy (MCP), although it called for a review of economic and price changes in October. As expected, the bank left the target yield on 10-year government bonds of Japan at about zero, the interest rate on deposits of commercial banks in the Central Bank at minus 0.1%.

At the same time, the leadership of the Japanese Central Bank noted a slowdown in the growth of foreign economies and the associated risks, which encourages it to pay closer attention to the possibility of losing momentum to achieve a target inflation rate of 2%. “Given this situation, the bank will review changes in the economy and prices at the next meeting when it updates the forecast of economic activity and prices”, the Bank of Japan said in a statement.

 

The pound received a double blow from Junker and from data

The pound received a double blow from Junker and from data

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Jim Anderson - Public Relations

The pound falls after European Commission President Jean-Claude Juncker warned bloc legislators that Brexit’s risk without an agreement is now “palpable”. Sterling fell 0.2% to $ 1.2479 after his words, falling from a maximum close to two months; he was more resistant to the euro, trading at 88.59 pence.

Juncker said that the so-called Backstop plan, the issue of the Northern Irish border, remains the main stumbling block, and demanded that the UK submit its proposals for its resolution in writing as soon as possible. EU chief negotiator Michel Barnier said no one should underestimate the damage to a tough Brexit.

The two-month pound/dollar reversal risk, which covers the Brexit deadline of October 31, rose to – 1.0300, signaling the smallest bearish sentiment against the UK currency since early August.

In London, a trial began on Tuesday on the legality of the suspension of parliament by Prime Minister Boris Johnson: a Supreme Court judge asked Johnson’s lawyer to provide a written statement outlining his plan if the judges ruled against him.

The pound received a further blow from the data on the consumer price index, which came out the day before when the Bank of England is expected to maintain interest rates.

US dollar rises after attacks on Saudi facilities

US dollar rises after attacks on Saudi facilities

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Erik Holm - Head of media

The US dollar rose in the morning hours of the European trading session. Fears about a significant increase in oil prices and the Gulf conflict led to a decrease in demand for risky assets before the start of a two-day Fed meeting.

Almost all analysts predicted a decrease in the target range of rates for US federal funds by 25 basis points. This was until the last days when unexpectedly good data in retail sales and US consumer sentiment, combined with hopes for a breakthrough in resolving the trade conflict with China, weakened arguments in favor of easing the Fed’s monetary policy.

The sharp rise in oil prices after the Saturday attack on Saudi oil facilities further clouded the picture, as it is likely to lead to higher inflationary pressures if oil prices remain high.

According to a forecast from Investing.com, the probability that the Fed will lower the interest rate on Wednesday fell below 65%.

However, according to an ING analysts, the main consequence of the sharp rise in oil prices so far has been a significant increase in the price of the US dollar, except for the option that the Fed will deploy monetary policy in the direction of its exceptional easing, the demand for the dollar will remain high, and the EUR / USD pair will fall in price to 1.05 – 1.10.

The euro was trading at $ 1,1012 before the markets today receive the first significant indicator of the economic situation this month - the ZEW economic sentiment index in Germany.

The dollar also rose to a maximum of four days against the offshore yuan, which remains under pressure after the release of weak economic reports of China on Monday.

The British pound also remained under pressure after the visit of British Prime Minister Boris Johnson to Luxembourg on Monday was further evidence of the absence of any progress in negotiations with the EU on the issue of signing the Brexit transition agreement.

The euro's movements after the ECB meeting

The euro's movements after the ECB meeting

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Jim Anderson - Public Relations

The euro fell and bonds rose after the European Central Bank announced interest rate cuts and a new quantitative easing program to support the region's weak economy. The single currency turned out to be about a two-year low, as the monetary institution said it would lower interest rates to -0.50% and resume its bond purchase program by 2.6 trillion euros in November at a rate of 20 billion euro per month. The regulator also said that it will introduce a two-tier negative rate policy system.

Eurozone bond yields fell to negative territory this year amid expectations of more stimulus from the ECB in the face of growing geopolitical risks, from Brexit to the US-China trade war. Meanwhile, the euro has hit its lowest level in the past two years this month.

The single currency fell by 0.42% to $1.0960 at 13:00 London time. Yields on 10-year German bonds fell by 4 basis points to -0.61%, while yields on sovereign bonds in Italy fell by 13 basis points to 0.85%.

But soon the euro won back all losses after ECB President Mario Draghi noted that the probability of a recession is low, adding that negative indicators created many positive effects. He fended off Trump's claims after yesterday's rate cut, saying the ECB was not aiming at a competitive devaluation. EUR / USD soared more than a figure from the low of the day, rising at the moment to the level of 1.1041. Earlier, the euro fell by 0.8% to 1.0926.

The euro’s upward movement is partly due to a short coverage in EUR / JPY before the positive opening of the NYSE; the spot is now approaching the large 1.1000 options that expire in the next two days. That is, they can keep the market on this level until the weekend.

Dollar peaks at six weeks against yen due to easing trade tensions

Dollar peaks at six weeks against yen due to easing trade tensions

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Erik Holm - Head of media

The dollar rose to a six-week high against the yen on Thursday after Washington and Beijing took steps to meet each other in trade, triggering an increased risk appetite for investors. China has exempted 16 categories of US products from additional duties, including whey and fishmeal used in animal feeds, some cancer drugs and lubricants, the Chinese Ministry of Finance said on Wednesday.

US President Donald Trump tweeted that he would postpone the increase in tariffs on Chinese imports planned for October by two weeks. The yen dropped 0.47% to 74.35 against the Australian dollar and 0.21% to 108.04 against the US dollar at 6:34 London time, previously reaching 108.16, the lowest level since August 1.

"Australian" reached a six-week high, while the Chinese yuan rose 0.4% to a three-week high of 7.0855 per dollar. The euro stabilized at $ 1,1014 in anticipation of the outcome of the ECB meeting, before dropping to a weekly low of $ 1.0983. The pound fell after a Scottish court on Wednesday declared the illegal suspension of parliament. The pound was trading without sharp fluctuations at $ 1.2328 after falling 0.4% to $ 1.2313 the day before.