US dollar mixed, euro higher after hawkish central bank shift

File photo of US dollar bills and yen notes. — Reuters pic
File photo of bills and yen notes. — Reuters pic

NEW YORK, Sept 19 — The US dollar was mixed this morning, weaker against the euro, the Swiss franc and the Japanese yen, but stronger versus the Antipodean currencies after a slew of decisions came in more hawkish than expected.

The Federal Reserve yesterday cut interest rates by 25 basis points to provide against risks including weak and resurgent trade tensions, while signalling a higher bar to further reductions in borrowing costs.

Subsequently, the Swiss National Bank, the Bank of England and the Bank of Japan all kept their policies on hold. Norges Bank increased its key policy rate, moving its rates in the opposite direction of the United States and European Union.

The dollar dipped, 0.22 per cent lower against a basket of currencies, despite Fed Chair Jerome Powell’s statement that “what we think we are facing here is a situation which can be addressed, which should be addressed, with moderate adjustments to the federal funds rate.” Powell noted that the US labor market was strong and was likely to return to the Fed’s 2 per cent annual goal.

Central banks “came off a really bad month of August for risk and for sentiment,” said Brian Daingerfield, macro strategist at RBS Securities in Stamford, Connecticut.

“But as September dawned, some of the worst US- trade escalation has pulled back, the market has been pricing out the possibility of a near-term no-deal Brexit as we prepared for elections in the UK. Some of the economic data have brightened a bit,” he added.

The Swiss franc rallied against its major peers on Thursday and is on track to post its biggest daily jump versus the greenback in a month. Against the dollar, the euro was 0.23 per cent stronger, last at US$1.1055.

Elsewhere, the Japanese yen maintained earlier gains after the Bank of Japan kept interest rates on hold, last up 0.37 per cent against the dollar. The BOJ also signaled the chance of expanding stimulus as early as its next policy meeting in October by issuing a stronger warning over the risks threatening the economy.

The central banks are generally “kind of holding their breath and holding their fire in terms of fully acknowledging that further easing could come down the road but not moving in a proactive way towards additional easing,” said Daingerfield.

Against the Australian and New Zealand dollars the US dollar was stronger, up 0.47 per cent and 0.21 per cent respectively. — Reuters

Source: The Malay Mail Online

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