Dollar remains soft on Fed rate hike uncertainty: Sept 27, 2016

Market Review - 26/09/2016  22:23GMT  

Dollar remains soft on Fed rate hike uncertainty

The greenback dropped against majority of its peers on Monday as expectations of a short-term rate hike by the Federal Reserve diminished. 

Versus the Japanese yen, although dollar staged a rebound from Asian low at 100.71 to 101.08 ahead of European open, price met renewed selling there and tumbled to an intra-day low at 100.32 in New York morning even though Bank of Japan Governor Kuroda reiterated his view of sticking to negative interest rates. 

BoJ's Kuroda said 'BoJ will pursue powerful monetary easing under new framework; will take into account impact on financial intermediation in guiding policy; BoJ won't hesitate adjusting policy if needed for Japan's economy; deepening negative rates, lowering long-term rate target will be main easing means; expanding asset purchases will continue to be among policy options, as well as accelerating monetary base expansion; BoJ stands ready to use every possible policy tool if needed to achieve its objectives; interest rates likely to decline significantly regardless of yield curve control if BoJ opts to expand monetary base; there may be cases where such powerful easing is needed; I am even more strongly convinced we should ensure Japan never returns to deflation; talking about limits to monetary policy doesn't help at all in beating deflation; there is no limit to monetary policy.' 

The single currency weakened to session low at 1.1221 at European open, however, euro pared its losses and rallied to an intra-day high at 1.1271 on dollar's broad-based weakness before stabilising. 

The British pound came under renewed selling in Asia on renewed Brexit concerns and tumbled to an intra-day low at 1.2915 on active cross-selling of sterling especially vs euro. However, cable pared its losses and staged a short-covering rebound to 1.2977 in New York morning. 

In other news, ECB's Draghi said 'the recovery in the euro area is expected to continue at a moderate and steady pace, but with slightly less momentum than envisaged in june; incoming information continues to point to the euro area economy being resilient to global and political uncertainty, notably following the uk referendum outcome; overall, our projections indicate that the accommodative monetary policy stance will continue to provide effective support to the cyclical recovery and the upward path in inflation; but financing conditions must remain supportive for our baseline scenario to materialise; any outcome of negotiations with uk should ensure that all participants in single market are subject to the same rules; low interest rate environment has a range of implications for economic actors that need to be carefully monitored.' 

Data to be released on Tuesday: 

Italy industrial orders, industrial sales, U.K. CBI Distributive Trades Survey, U.S. building permits, Redbook index, S&P/Case-Shiller home price indices, Markit service PMI, consumer confidence and Richmond Fed manufacturing index.