“Perhaps, it [keeping the policy unchanged] was the best move because the bank certainly wants to assess the consequences of Brexit which has triggered the need for more QE [quantitative easing] and dragged the bond yields in negative territory”, he said. It has gained 10 percent over the last month.
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News that the Canadian Dollar had finally hit levels higher than it was trading at a year ago may also have slightly bolstered “Loonie” sentiment.
Tempering risk appetite, however, was Turkish President Tayyip Erdogan who declared a state of emergency on Wednesday as he widened a crackdown against thousands of members of the security forces, judiciary, civil service and academia after a failed coup. Inflows to EM assets hit their highest level in almost three years last week, according to the latest survey by the Institute of International Finance.
JAPAN STIMULUS: Japanese media reported the government may be considering a 20 trillion yen ($186 billion) fiscal stimulus package.
The dollar index, which tracks the greenback against a basket of six main world currencies, dipped in Europe to 96.884 having touched its highest level since early March on Wednesday.
The greenback has climbed to almost a 1-month high of Y106.835 against the Japanese Yen this afternoon, from an early low of Y105.818.
The US Dollar soared across the board during Tuesday’s session as investors sought out “safe-haven” currencies following a drop in appeal for risky investments. It was last at 97.06, broadly steady.
The sterling lost ground as a result, declining 0.26% against the euro and 0.22% against the dollar and exchanging hands at €1.1958 and $1.3177 respectively.
The European Central Bank’s decision on eurozone monetary policy could well dominate the markets even if it leaves interest rates and its asset-purchase programme unchanged.
“The weakness of the euro provides automatic stimulus to the economy, which means the European Central Bank can afford to wait”, wrote Kathy Lien, managing director of FX strategy for BK Asset Management.
The dollar was up 0.3 percent at 107.210 yen after touching 107.460, its highest since June 7. Economists are expecting a hit to global growth due to Brexit and euro-zone economies are expected to be particularly vulnerable.
THE QUOTE: “Mario Draghi’s speech is hotly anticipated by investors as they look for clues and guidance on what measures the central bank will take post Brexit to navigate through uncertainty”, said Alex Wijaya, senior sales trader at CMC Markets.
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Crude oil extended gains in the Asian session. Brent crude was slightly higher in Asian trading at US$47.35 a barrel, after settling up 1%, while USA crude edged 0.4% higher at US$45.86, after adding 0.7% overnight.
