The euro is now well off the floor of $1.05 reached against the dollar in the spring and the EUR/USD rate looks to be moving into a new higher trading range, certainly for as long as turbulence persists on financial markets.
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The dollar cut gains against the safe-haven yen and euro on Wednesday, as Chinese and European stock markets lost ground despite China’s easing measures, with most investors fretting over the outlook for the global economy. It was the lowest reading since March 2009. Brent added 2.4 percent to $44.16.
“We’re losing against most of our Europeans on reduced Fed expectations, but against the commodity-based currencies, we’re rocking and rolling”, said John Doyle, director of markets at Tempus Inc. During the past two years, the Non-Farm Payrolls report revealed that the economy has added more than 230,000 job positions per month, evenly distributed. Australia’s dollar was little changed at 71.30 U.S. cents. Earlier, a statement that the Reserve Bank of New Zealand won’t tighten interest rates to moderate risks from rising house prices in Auckland because that will deviate from the primary goal of price stability was made by Deputy Governor Grant Spencer.
Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore, said Japanese and euro zone policymakers were unlikely to tolerate further sharp rises in the euro and yen. The Shanghai Composite Index picked up temporarily after the rate cut announcement but failed to halt its recent freefall.
Even though opinions about the health of the Chinese economy vary, the crisis is serious for the rest of the world. It’s notable that OPEC’s oil production spiked to a 3-year high in July. The Hang Seng index was off 3.65%.
In times of financial stress, however, investors sell those higher-yielding currencies and flock back to the euro and yen, with both benefiting from an unwinding of those carry trades.
“The two policy uncertainties – one in China and the other one in the U.S. – will likely continue to weigh on emerging-market, as well as Antipodean currencies, including the Aussie”.
Greece met all of its debt requirements to the global Monetary Fund and the new discussions between Greece officials and their creditors are now looking forward to a debt relief. The dollar index was up 1.22 percent at 94.
The dollar is regaining its footing. The Australian dollar dropped below 88.00 yen for the first time since late 2013. It has gained 21 cents in four months and the next big level is A$1.5831.
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However, he warned about overreacting to “short-term” market moves, and left the door ajar to raising rates when the U.S. central bank holds a policy meeting on September 16-17.
