Dollar Plummets as Fed Leadership awaits Announcement

The dollar slipped down on Tuesday following its recent highs in the previous days, while the market keeps close tabs on the naming of the next head of the US central bank.

The dollar index, which tracks and compares the dollar against a basket of six other major currencies, dipped 0.2 percent at 93.741, backing away from 94.017. The latter figure has been recorded as its highest since October 6.

Against the yen, the dollar slumped 0.1 percent to 113.35 yen. This was also a move away from its 114.10 yen hit that came following Japan’s general election, in which the Asian country’s Prime Minister Shinzo Abe’s ruling bloc boasted a solid victory on Sunday, ensuring the continuation of his “Abenomics” policies and the Bank of Japan’s ultra-easy monetary policy.

Masashi Murata, senior currency strategist at Tokyo-based Brown Brothers Harriman, said that the risk-on sentiment has wavered at least for now, adding that the Japanese election’s result was “not so surprising” and was mostly priced in.

Meanwhile, the euro inched 0.1 percent higher to $1.1762. However, the gains shown seemed to have been capped ahead the European Central Bank’s meeting on Thursday.

In the meeting, the Bank is anticipated to give hints on the steps it will take away from its monetary stimulus program.

Moreover, the crisis between Catalonia and Spain bore weight on the euro. Madrid has reportedly invoked special constitutional authority and used it to dismiss the Catalonian regional government and counter the independence movement via elections.

The voting result made by the National Senate is due on Friday.

The New Zealand dollar slipped 0.2 percent at $0.6949, not so far away from its five-month low of $0.6932 slump on Monday. The policies were considered unfriendly to foreign investment and immigration, increasing the pressure on the currency in light of the fact that the country runs a current account deficit.

“Very, very close”

U.S. dollar index declines

US President Donald Trump said on Monday that he was “very, very close” to naming his chosen candidate to lead the Federal Reserve, following his interview the five nominees for the position.

“It’s a big question for the markets. It’s one thing to speculate about it, but it’s another to take an FX position,” said Tokyo-based State Street Bank branch manager Bart Wakabayashi.

The candidates include Janet Yellen, whose reign as the current Fed Chair expires in February. Jerome Powell, who is the current Fed Governor, is also in the list. They are accompanied by Stanford University economist John Taylor, the president’s chief economic advisor Gary Cohn, and former Fed Governor Kevin Warsh.

Wakabayashi added that certain rumors trigger “some selling and buying,” based on perceptions of “who might be more dovish or more hawkish.”

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