Dollar on the back foot after Powell’s comments, sterling surges

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The Australian dollar was a shade lower at $0.7182, taking a breather after three straight days of gains.

The Aussie was hurt at the start of February after the Reserve Bank of Australia opened the door for an interest rate cut. But the currency has rebounded nearly 2 percent from this month’s low of $0.7054 plumbed on Feb. 12.

“Differences in monetary policies are less of a driver for currencies after the Fed shifted to a more dovish stance, prompting other central banks to follow. Risk appetite is now a key incentive, and currencies like the Aussie benefit from ‘risk on,’” said Yamamoto at Mizuho Securities.

Global equities have performed strongly this week – MSCI’s world stock index advanced to a five-month peak – on factors including ebbing U.S.-China trade tensions.

Equity markets performance and monetary policy might come into focus again, especially if investors sell down stocks heavily, analysts say.

“Equities may not be a concern when they are rising but if that were to change, comments by Fed board members pertaining to any additional policy steps will gather attention once more,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities.

The dollar was little changed at 110.58 yen after shedding 0.4 percent the previous day. The greenback rose to a two-month high of 111.24 on Monday but has met firm technical resistance near the 200-day moving average 111.30.

(The story corrects typographical error in pound figure in sixth paragraph)

Editing by Sam Holmes & Shri Navaratnam

Our Standards:The Thomson Reuters Trust Principles.

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