Some strategists believed the implications from the Fed’s updated forecasts and its policy statement were more hawkish than the market’s reaction would suggest.
Fed Chair Janet Yellen, in a post-decision press briefing, said every meeting would be a “live” one where the USA central bank can make a decision to raise rates.
Bloomberg quoted Kenya’s finance minister, Henry Rotich, saying that the United States had a responsibility to prevent such a move that would have hurt emerging markets.
Some said there were indications that the yen may have suffered from a high demand for dollars in Japan compared to elsewhere, reflected in prices of cross currency basis swaps. The U.S. greenback has strengthened against a basket of currencies (including the Australian dollar) as a result, with many foreign investors buying USA dollars to take advantage of the higher returns.
The greenback fell against most of its major peers after policy makers kept borrowing costs at a record low Thursday, citing low inflation, an uncertain outlook for global growth and recent financial-market turmoil.
The US Fed is considering raising United States interest rates for the first time since 2006, although economists are split in their expectations. “But at the same time, it will indicate that it is highly likely to raise rates by the end of the year“, said Tomoaki Shishido, fixed income analyst at Nomura Securities. He says the Canadian dollar will then begin to track downward, but in the meantime the Bank of Canada will essentially have its hands tied in its efforts to drive the currency lower.
Traders are awaiting second-quarter gross domestic product data for New Zealand, which will likely show the country’s economy expanded 0.6% in the period, as they assess whether the Reserve Bank will cut interest rates again.
The rupee slipped against the pound sterling to close at 102.58 as against Wednesday’s level of 102.49 and also moved down against the euro to 75.04 from 74.58 previously. The dollar was trading at 120.94 yen, up around a third of a percent from late US trade. David Lamb, head of dealing at FEXCO, said, “Dollar bulls had convinced themselves that even if the Fed left rates unchanged, it would at least give some sort of timetable”.