FX Roundup: Dollar trades lower for second successive session

The dollar traded lower against major crosses on Friday after the US Federal Reserve decided to keep interest rates unchanged earlier in the week at 0.25%, in line with market expectations but left the door open to an increase in December.

At the conclusion of its two-day FOMC meeting earlier in the week, the central bank also downplayed global economic headwinds in its statement on the policy decision, saying that it was monitoring developments abroad.

In response, the pound rose for the second successive session against the dollar, up 0.54% exchanging at $1.5392 at 1447 GMT, while the euro was up 0.80% changing hands at €1.11065.

The greenback also slipped against the yen, down 0.55% changing hands at JPY120.46, as the Bank of Japan refrained from implementing fresh stimulus measures.

The BoJ lowered its forecasts for economic growth and inflation, due to the slowdown in global growth. Noting substantial uncertainties, the central bank forecast gross domestic product to expand 1.2% this year compared with a prior estimate of 1.7%.

It pushed back the time frame in which it expects to meet its 2% inflation target, from the middle of 2016 to next year or early 2017.

Kit Juckes, head of forex at Societe Generale, said, “The Fed is teasing us with the possibility of a December rate hike. The ECB is suggesting rather more forcefully that more easing could be forthcoming.

“The BoJ, helped out by the ECB and Fed, has decided to wait and watch. All of this is good for the dollar but the bigger question is whether commodity prices are in overshoot and set to stabilise, or still set for another significant leg lower as global growth slows. That would drive the dollar up more than anything the FOMC might deliver.”

The greenback also slipped by 0.39% against the Swiss franc changing hands at CHF0.9856, while major emerging market currencies also enjoyed a breather, except the Indonesia rupiah and Malaysian ringgit which fell against the dollar.

Commodities-linked currencies got respite as the New Zealand dollar rose 0.85% against the greenback to change hands at US$0.6750, with the Australian dollar rose 0.47% changing hands at US$0.7107.

In the Americas, the dollar traded lower against the Canadian dollar (down 0.22%), Brazilian real (down 0.41%) and the Mexican peso (down 0.53%) but rose against the Chilean peso (up 0.36%).