Dollar holds steady, Fed minutes in focus The dollar held steady against a basket of other major currencies on Wednesday, still broadly supported as concerns over the outlook for global growth weighed on sentiment ahead of the release of Federal Reserve meeting minutes later in the day. The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, inched up 0.05% to 85.81, not far from a four-year peak of 86.87 hit last Friday. Market sentiment was hit on Tuesday after the International Monetary Fund cut its forecast for global growth for both this year and next and warned that global growth may never reach its pre-crisis levels again. The IMF said it now expects global economic growth of 3.3% this year, down from 3.4% in July and growth of 3.8% in 2015, compared to an earlier forecast of 4.0%. Demand for the safe haven yen was boosted and USD/JPY remained near three week lows of 107.75 hit overnight, before pulling back slightly to trade a 108.19, unchanged for the day. The yen strengthened on Tuesday after Japanese Prime Minister Shinzo Abe voiced concerns over the impact of a weaker yen on the economy. The Bank of Japan left monetary policy unchanged at its policy meeting on Tuesday, but acknowledged that declining domestic demand as a result of a sales tax increase in April was leading to economic weakness. Investors were turning their attention to the minutes of the Fed’s September meeting, due out later in the day, for fresh indications on the future possible direction of U.S. monetary policy. The dollar has rallied against the euro and the yen in recent months amid growing expectations that the Fed is growing closer to raising interest rates, while central banks in Japan and Europe are likely to stick to a looser monetary policy stance. EUR/USD touched session lows of 1.2623 and before retracing some of thoses losses to trade at 1.2667. The single currency remained under pressure after data on Tuesday showing a steep decline in German factory orders in August added to concerns that the euro area’s largest economy being pulled into a recession. The weak data added to expectations that the European Central Bank will implement fresh stimulus measures to help bolster growth. The IMF said Tuesday that Europe was experiencing a multispeed recovery and revised down its growth forecasts for the euro zone’s three largest economies, Germany, France and Italy. The pound and the Swiss franc slipped lower, with GBP/USD easing 0.09% to trade at 1.6083 and USD/CHF edging up 0.13% to 0.9578. The commodity linked dollars were broadly weaker, with AUD/USD down 0.40% to 0.8779, NZD/USD shedding 0.26% to trade at 0.7810 and USD/CAD adding 0.16% to 1.1181.
Posted on: Wed, 08 Oct 2014 13:14:37 +0000
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