NEW YORK (Reuters) – The dollar fell on Friday as the US Federal Reserve’s new policy framework indicated interest rates would remain low while the yen rose sharply after Japanese Prime Minister Shinzo Abe announced his resignation.
FILE PHOTO: US Dollar and Japan Yen Notes Viewed in This Illustrative Image June 22, 2017. REUTERS / Thomas White / Illustration
The yen JPY = EBS was strengthened significantly against the dollar following the news that Abe, Japan’s longest-serving prime minister, would fall due to deteriorating health.
Concerns about a possible shift away from Abe’s expansive economic policy, known as Abenomics, were fighting for the movement in the safe currency, investors said.
The dollar was last down 1.1% against the yen at 105.38.
“You see the yen strength on a bit of uncertainty,” said Lou Brien, strategist at DRW Trading in Chicago. “Abenomics has been one of the more influential economic strategies.”
Greenback resumed his slide against a basket of major currencies in the wake of Fed Chairman Jerome Powell’s remarks at the virtual Jackson Hole conference. Powell said the US Federal Reserve would, on average, try to keep inflation at 2%, so periods of too low inflation are likely to be followed by an attempt to lift inflation above 2% for some time.
In practice, market participants expect this to mean that current ultra-low rates will remain lower for longer, thus pushing the dollar. After finding out an initial slide on Thursday immediately after Powell’s speech, the dollar weakened again overnight.
The dollar index = USD was last 0.7% lower at 92,325.
Both the unfathomable Fed policy and a weak U.S. economic recovery have helped push the dollar down, said Boris Schlossberg, CEO of FX Strategy at BK Asset Management in New York. Abundant government issuance next month is also likely to keep the greenback lower, Schlossberg added.
“The foreign exchange market is doubtful about the long-term impact of the recovery in the United States,” Schlossberg said. “So it has been beneficiary non-US assets.”
As the dollar weakened, the euro EUR = EBS rose 0.63% to $ 1.1896.
The rise of the euro puts it closer to a technical level close to $ 1.19, which it has been testing on a regular basis over the past month, investors said.
The foreign exchange markets were largely pro-risk. The New Zealand dollar NZD = D3 hit its highest against the US dollar since January, while the Australian dollar rose to its highest since December 2018 AUD = D3.
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Currency prices at 15.40 (1940 GMT)
Description RIC Last USA Close Pct Change YTD Pct High bid Low bid
Euro / dollar EUR = $ 1.1896 $ 1.1821 + 0.63% + 6.12% +1.1919 +1.1812
Dollar / Yen JPY = 105.3800 106.5500 -1.10% -3.20% +106.9400 +105.2100
Euro / Yen EURJPY = 125.37 125.96 -0.47% + 2.80% +126.7500 + 125.2000
Dollar / Swiss CHF = 0.9041 0.9088 -0.52% -6.58% +0.9102 +0.9025
Sterling / Dollar GBP = 1.3349 1.3198 + 1.14% + 0.68% +1.3356 +1.3187
Dollar / Canadian CAD = 1.3088 1.3123 -0.27% + 0.79% + 1.3132 + 1.3047
Australian / Doll AUD = 0.7358 0.7258 + 1.38% + 4.80% + 0.7359 + 0.7256
Euro / Swiss EURCHF = 1.0759 1.0744 + 0.14% -0.86% +1.0768 +1.0743
Euro / Sterling EURGBP = 0.8911 0.8954 -0.48% + 5.41% +0.8974 +0.8909
NZ NZD = 0.6738 0.6637 + 1.52% + 0.03% +0.6743 +0.6631
Dollar / Dollar
Dollar / Norway NOK = 8.7984 8.9151 -1.31% + 0.23% +8.9218 +8.7781
Euro / Norway EURNOK = 10.4670 10.5370 -0.66% + 6.39% +10.5530 +10.4530
Dollar / Sweden SEK = 8.6277 8.7160 -0.48% -7.70% +8.7355 +8.6100
Euro / Sweden EURSEK = 10.2659 10.3156 -0.48% -1.94% +10.3215 +10.2602
Reporting by April Joyner; Additional reporting from Elizabeth Howcroft in London and Swati Pandey in Sydney; Editing Will Dunham