Weaker US Dollar Sparks Rise In Cross Currencies

The US dollar immediately reversed gains on Wednesday after the release of FOMC minutes, which supported a rate increase in December. This was nothing earth shattering in the minutes as a bevy of Federal Reserve members have been on the speaking circuit over the past weeks endorsing a rate increase in December. In Asia on Thursday the dollar is trading at 99.25 down by 42 points after touching highs above the 99.8 price level on Wednesday afternoon.  The weaker US dollar helped support Asian currencies as well as the euro in the morning session.

The euro gained 46 points to trade at 1.0706 but continues to be weighed down but terrorist actions and the response in Europe. The closing of borders in many countries to slow the flow of immigrants may never be reserved and the costs associated with initiating border controls could have a last effect on the Eurozone economy.  The European Union will have to review its framework to allow some countries to do everything together and others to be less involved, the president of the European Commission said on Wednesday. His comments came as London and its European partners thrash out reforms Britain wants in the EU, before the country holds a referendum on whether it will remain a member or leave – a so-called Brexit. Speaking at a conference in Brussels, Juncker declared “Brexit will not happen”. But he added that the EU should reconsider its organization to make sure members may share policies at different speeds, if they wish.

The pound gained 50 points to trade at 1.5285 mostly on the weakness in the US dollar. Sterling held at a three-month high against a trade-weighted basket of currencies on Wednesday, with foreign exchange investors eyeing UK retail sales data due the next day for direction. Bank of England Deputy Governor Ben Broadbent said at a Reuter’s event that investors should not put too much faith in market bets on when the bank will raise interest rates. Those bets now indicate the first increase won’t come for more than a year.

Yesterday the Japanese Yen depreciated by 0.15 percent owing to disappointing release of earnings data from the Japanese companies. Market is still discounting the weak release of GDP data from the nation which showed that the economy has slipped into recession for the second time since Prime Minister Shinzo Abe came to power nearly three years ago. This dented the demand for Japanese Yen. The Bank of Japan maintained its current pace of monetary stimulus on Thursday, clinging to hopes that an economic recovery is in sight despite soft domestic capital expenditure and challenging global business conditions. The central bank also kept intact its assessment that while exports and output were feeling the pain from weak emerging market demand, Japan’s economy continued to recover moderately. The JPY climbed 42 points against the US dollar to trade at 123.22. Against the euro the Japanese yen traded at 131.91 declining 16 points.

Both the kiwi and the Aussie soared as traders moved back to cheap commodity currencies and the greenback eased. The Aussie gained 56 points to 0.7166 while the kiwi gained 62 points to 0.6534 after producers prices rose unexpectedly.