“I think the odds of [monetary easing] were half and half, but the most surprising point is that the markets seemed to have been surprised”, said Masashi Murata, a currency strategist at Brown Brothers Harriman in Tokyo.
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The Federal Reserve statement was not hawkish enough to trigger a shift in USA fed futures and the potential for a further delay in lifting USA rates provided significant underlying support for gold and prices hit a low just below $1,240 in early Asian trading.
The dollar edged up 0.2 percent to 111.73 yen, moving back toward a three-week high of 111.90 notched on Monday.
The central bank’s support for the USA dollar offset the impact of the continued strength of the Japanese yen, which led other regional currencies to move higher, they said.
Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.2% to 804 tonnes on Thursday.
Earlier in the session, the Reserve Bank of New Zealand kept its benchmark interest rate unchanged at 2.25 percent, but reiterated further easing may be needed given weak inflation. It rose a mere 0.1 percent, to 21,388. Around 2100 GMT, the euro traded at US$1.1452, up a solid 0.9 per cent from the same time on Thursday. Japan’s Nikkei Stock Average erased early gains to close down 3.6% after the announcement, while the dollar was last up 3% against the yen at ¥ 108.1980.
The currency’s safe-haven appeal in an environment of uncertain global growth has been amplified by questions about the Bank of Japan’s effectiveness after a decision to implement negative rates backfired, driving the yen higher and weakening stocks.
Mom and pop investors were also likely rebalancing portfolios ahead of month-end and selling the dollar in the wake of the Federal Reserve’s policy statement from Wednesday, said Greg Anderson, global head of FX strategy at BMO Capital Markets in NY.
Wheeler’s statement came after the Federal Open Market Committee kept the target range for its overnight lending rate at 0.25 percent to 0.5 percent, as expected, noting an improvement in the United States labour market and saying it remained confident inflation would rise to its 2 percent target over the medium term. The Shanghai Composite Index in mainland China lost 1.2 percent to 2,917.30 and Australia’s S&P/ASX 200 added 0.8 percent to 5,229.50.
Both main contracts – West Texas Intermediate and Brent – rose to fresh 2016 highs today, topping off another strong week that saw U.S. production fall.
Toyota closed down 3.27 percent, Nissan fell 4.31 percent and Honda was down 4.18 percent.
USA crude futures were down 0.2 percent at $45.17 a barrel, after hitting their 2016 high of $45.62 following the Fed’s decision.
Oil prices, meanwhile, held steady Thursday after hitting a 2016 high the previous day.
US Treasury prices fell, with the benchmark 10-year note down 2/32 in price to yield 1.8457 percent.
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Modest profit-taking set in on Friday, with Brent crude off 25 cents to US$47.89 a barrel.
