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The FOMC & RBNZ Hold Rates And Policy And Have Positive Comments, Next Up BoJ

By:
Barry Norman
Updated: Aug 25, 2015, 07:00 UTC

The FOMC two day decision making event ended late on Wednesday with a surprisingly positive statement. Today Janet Yellen will address the markets. The

The FOMC & RBNZ Hold Rates And Policy And Have Positive Comments, Next Up BoJ
The FOMC & RBNZ Hold Rates And Policy And Have Positive Comments, Next Up BoJ
The FOMC & RBNZ Hold Rates And Policy And Have Positive Comments, Next Up BoJ

The FOMC two day decision making event ended late on Wednesday with a surprisingly positive statement. Today Janet Yellen will address the markets. The FOMC slightly revised the language in their statement to give a rosier outlook at the US labor market and the overall recovery. Interest rate increases were now openly mentioned. Trader’s reactions were completely predictable. The US dollar soared to trade at 86.17 while gold tumbled to 1212.00. All major dollar crosses tumbled against the stronger greenback.

Within minutes of the reaction the Reserve Bank of New Zealand concluded its rate and policy meeting. The strength of the U.S. currency was a blow to the New Zealand dollar, which tumbled on a softening stance over future interest rate increases by the Reserve Bank of New Zealand. The NZD is trading at 0.7800 virtually flat this morning. New Zealand’s central bank held its benchmark rate at a five-and-a-half year high on Thursday, but dropped its explicit tightening bias, as it renewed its attack on the high level of the currency. The kiwi has slid about 10 percent against the dollar from its three-and-a-half year high in mid-July. The kiwi’s cousin, the Aussie is also in the red at 0.8778. The Australian dollar lost nearly 1¢ on the announcement and is down 0.86 per cent to US87.78 after falling sharply as the greenback gained. US major stock indexes closed lower, while the yield on 10-year treasuries climbed 5 basis points to 2.35 per cent. Australian 10-year yields followed suit and rose from 3.31 per cent to 3.40 per cent.

us dollar

Remaining in Asian, the Japanese yen fell to trade at 109.01 adding 10 points in the session. Speculation about the Japanese Pension Funds new strategy has held

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Japan’s markets in sway since a government-picked panel said almost a year ago that GPIF was too reliant on domestic bonds. The fund will slash its local debt allocation to 40 percent from 60 percent, unchanged from May, the median survey prediction shows. The BOJ’s bond-buying has driven down government yields, enhancing calls for GPIF to move away from the low returns on sovereign securities. Benchmark 10-year yields dropped to 0.46 percent this week, matching the lowest since April 2013, when the BOJ announced unprecedented stimulus. The Bank of Japan meets tomorrow after data showed this week that industrial production jumped the most since January and retail sales rose more than analysts expected in September. The central bank will consider moderating its language on inflation in a report to take account of the impact of lower oil prices, according to people familiar with central bank’s discussions.

The euro tumbled against the dollar to trade at 1.2625 after the US Fed statement. Euro traders will closely monitor today’s German employment numbers as the continued pressures from the eurozone crisis is weighing heavily on the German economy. Traders will also get a look at Spanish GDP.

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