USD retreats ahead of Fed meeting

USD retreats ahead of Fed meeting.

The currency markets are expecting the US Federal Reserve to offer forward guidance on keeping interest rates low for some time and as a result, the US Dollar is retreating – hitting a one-month low against the Yen.

Following a 1.2% loss last week, in the third consecutive weekly loss, the dollar index is now holding just above key chart support, which could spur more losses in holiday-thinned trade.

The US Dollar was also broadly under pressure ahead of a two-day meeting of the Federal Reserve’s monetary policy committee starting on Tuesday.

Mirroring a Wall Street Journal article last week, JPMorgan Strategist John Norman said that the Fed is likely to change its forward guidance in an attempt to convince markets that rates will stay near zero for a long time to come – even if the Fed slows down asset buying.

Against this backdrop, the dollar index fell to as low as 81.499, its lowest level since June 20.

Meanwhile, the Yen was the strongest mover in Asian trade, with the Dollar/Yen falling 0.5% to 97.80 Yen, to the lowest since June. Bank of Japan Governor Haruhiko Kuroda said that the bank’s quantitative easing plan is working well, but this provided only a limited boost to Dollar/Yen.

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