For Citi, that means buying the yen and selling the Brazilian real, Australian dollar and New Zealand dollar if stocks decline after the Fed’s first rate increase in almost a decade. “The Fed has warned they are more concerned about global growth but they are still encouraged by U.S. economic activity and are still on track to raise rates this year”.
The Australian share market has climbed higher as the US Federal Reserve decides whether to hike its benchmark interest rate.
Westpac is among those expecting the Fed to hike its federal funds rate by 25 basis points – its first increase since 2006 – due to job market improvement, solid growth and sufficient inflation.
“The general message is [that] things are getting better but we are not there and are more focused on the risks”, said Steven Englander, global head of G-10 FX strategy at Citi. But it fell 0.4% against the Korean won and retreated 1.2% versus the Malaysian ringgit. “This should include upward revisions to GDP projections but a lower profile for interest rates“, Callow said in a note to clients on Thursday.
Following the Fed decision, rates futures placed an 18 percent chance that the U.S. central bank would end its near-zero interest rate policy in October, down from 41 percent Thursday morning, according to CME Group’s FedWatch program. It rose 1.3 percent on Wednesday in its biggest daily jump since Aug. 20, helped by data showing U.S. consumer prices unexpectedly fell in August. The Antipodean currencies have proved remarkably resilient to volatility in commodity and Chinese stock markets, with the Aussie up 1.5 percent so far this week and the kiwi 0.7 percent higher.
Crude futures are down by more than 50% from its peak above $100 a barrel last summer, after OPEC rattled global energy markets with a strategic decision to keep its production ceiling unchanged. However, Newcrest Mining shares were trading 83 cents higher at $12.64. Republication or redistribution of content provided by EconoTimes is expressly prohibited without the prior written consent of EconoTimes, except for personal and non-commercial use.