Forex - Dollar stable after overnight drop on Fed's soft wording |
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Thu, 22 Mar 2007 10:15
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LONDON (AFX) - The dollar was stable after weakening overnight on the Federal Reserve's decision to leave interest rates unchanged and to sound more dovish than in the past in its statement.The Fed was expected to hold fire, so the focus was on their shift in wording, using the phrase 'future policy adjustments' instead of the previous 'additional firming', effectively taking out the tightening bias. It also mentioned the housing sector is undergoing an adjustment and that data has been mixed.'The perception of greater potential for Fed easing - a rate cut at the August 7 meeting is now fully priced in - has further fuelled investor appetite for risk,' said Steve Pearson at HBOS.He believes the dollar will remain soft in the near-term on views that the Fed is more likely to cut rates, although a more significant weakening in the US and global economies would paradoxically give some support to the dollar, due to the unwinding of risk asset markets -- meaning higher yielding currencies around the world would be sold, largely against the Japanese yen and the US dollar.The euro zone industrial orders and trade data for January may give the euro some more direction against the dollar, but the main focus will remain on the Fed, as several of its rate-setters will have speeches today.In the UK, the pound remained on the back foot after yesterday's minutes to the Bank of England's last rate decision were particularly dovish. The minutes showed a 8-1 vote for unchanged rates, with one vote for a cut, whereas expectations were for two dissenters to seek a hike.Daragh Maher at Calyon said that the higher risk and volatility seen in global markets recently was the main factor to spook the BoE's hawks, as other factors hadn't changed much in the past month.As such, 'now that markets have regained their poise, this may suggest that March's lack of hawkish dissent need not undermine the case for a move in April or May, with attendant upside for the pound,' Maher said.Retail sales data for February this morning will be eyed for more direction, particularly after the slump registered in the January figures. Analysts said that the likelihood of an upwards correction to the data may support the pound.London 0845 GMT Singapore 3.30 pm (0730 GMT)US dollaryen 117.45 up from 117.33sfr 1.2103 up from 1.2092Eurousd 1.3367 down from 1.3376yen 156.99 up from 156.94sfr 1.6179 up from 1.6175stg 0.6795 down from 0.6799Sterlingusd 1.9673 up from 1.9669yen 231.06 up from 230.76sfr 2.3813 up from 2.3783Australian dollarusd 0.8070 up from 0.8065stg 0.4102 up from 0.4100yen 94.78 up from 94.64carlo.piovano@thomson.comcp/lamCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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Forex - Yen crumples in Singapore afternoon trade as Bank of Japan holds rates 