A flaw in the megacap market Following the release of the Fed minutes, a sell-off in Asian stocks extended, reinforcing demand for the safe-haven allure of government debt and safe-haven currencies.
“The risk off theme is obvious across all markets, particularly in currencies like the Australian dollar, Canadian dollar, and New Zealand dollar,” said John Marley, CEO of forexxtra, a London-based FX consultancy.
“It appears as if this is a washout of positions that might have genuine potential in a market that has already seemed quite thin this week,” he added.
The Australian dollar dropped 0.8 percent to $0.7428, its lowest since mid-December. The safe-haven yen surged 0.8 percent to 109.8, setting a new high for a single day since early November 2020.
The dollar index =USD, which compares the greenback to six other currencies, was marginally lower at 92.588 on Thursday, after touching 92.844 for the first time since April 5.
According to a Reuters poll, the Fed is expected to disclose a strategy for tapering its asset purchases in August or September. While the majority of respondents believe the first cut to its bond-buying program would happen early next year, nearly a third believe it will happen in the fourth quarter of this year.
Before the European Central Bank’s news conference, the euro was one of the few currencies to hold its ground against a broadly strong dollar, rising 0.2 percent to $1.1813.
President Christine Lagarde of the European Central Bank will hold a press conference after the monetary authority releases the results of an 18-month strategy review, which is expected to include a shift in the inflation target to 2% from the current “below but close to 2%” – theoretically allowing for inflation overshoots.
“For the euro, it possibly eliminates a source of support,” said Stuart Cole, head macro economist at Equiti Capital in London. “However, the ECB was unlikely to tighten policy soon anyway, so the impact is likely to be primarily at the margin,” he said.
Check out our economic calendar for a complete list of today’s economic happenings.
(Saikat Chatterjee contributed reporting, and Angus MacSwan edited the piece.)/n
