FX Roundup: Dollar falls against major crosses
The dollar was down against a basket of global currencies on Wednesday, prior to the conclusion of the US Federal Reserve’s two-day monetary policy meeting later in the session.
The US central bank’s Federal Open Market Committee (FOMC) is widely expected to delay an interest rate hike until the New Year. Despite expectations in certain quarters for a rate hike in September, the FOMC decided otherwise last month, lowering its estimate of the US economy's potential rate of growth noting it was monitoring "developments abroad".
Past 1509 GMT, the euro and pound had risen against the greenback by 0.20% and 0.16% fetching $1.1073 and $1.5324 respectively. The dollar also fell 0.07% against the yen fetching JPY120.42, and 0.30% against the Swiss franc fetching CHF0.9833.
Kit Juckes, head of forex at Societe Generale, said, “The market is spending the day watching oil prices, equities and Bund yields and waiting for the FOMC. A policy move is really, really unlikely and I wouldn't hold out much hope of a shift in the policy statement to encourage pricing of a December hike, by say, removing the reference to international developments in then assessments of risks.”
“Can Fed dovishness calm global markets and stop the dollar's advance? I'm not sure. Oil prices are one worry, and the precipitous fall in Bund yields another. The Fed will have its work cut out tom prevent a slip in EUR/USD under 1.10 towards 1.08.”
Meanwhile, the pound fell 0.11% against the euro changing hands at €1.38340, as Bank of England Governor Mark Carney said a UK interest rate hike was by no means imminent. The country's quarterly growth recently came in at 0.5%, marginally below market expectations.
Overall, the dollar still remains the best performing G10 currency, and analysts at Rabobank noted: “On balance we see little reason to alter our long held forecast that EUR/USD will edge to 1.08 on a six month view and then towards 1.05 in 12 months.”
Finally, commodities linked currencies continued to struggle. The Australian dollar fell 0.79% against its US counterpart changing hands at US$0.7136, while the New Zealand dollar fell 0.59% to change hands at US$67.25. The Norwegian Krone was broadly flat against the greenback changing hands at NOK8.4570, but the greenback slipped 0.86% against the Canadian dollar exchanging at CAD$1.3155.