Yen and euro out­per­form as stocks and oil slide

The Pak Banker - - MARKETS/SPORTS -

LON­DON : The safe-haven yen and the low-yield­ing euro rose on Tues­day, as global stock mar­kets and oil prices fell, driv­ing in­vestors to safety and away from com­mod­ity-linked and oil-re­lated cur­ren­cies such as the Aus­tralian and Cana­dian dol­lars. The dol­lar in­dex .DXY fell, with in­vestors cau­tious be­fore the out­come of the Fed­eral Re­serve's two-day pol­icy meet­ing be­gin­ning later in the day. In­vestors will be pars­ing the U.S cen­tral bank's mes­sage to de­ter­mine what, if any, ef­fect volatile global mar­kets, plum­met­ing oil prices and height­ened fears of a Chi­nese slow­down will have on the Fed's pre­vi­ously stated in­ten­tions to con­tinue rais­ing rates this year. U.S. in­ter­est rate fu­tures im­plied that traders put the chance of a Fed rate hike this week at just 13 per­cent. Over the year, mar­kets are pric­ing in only one hike, com­pared to the Fed's rate path, which fac­tors in at least four rises.

The dol­lar was down 0.45 per­cent against the yen at 117.76 yen JPY=, while the euro was up 0.15 per­cent at $1.0865 EUR=. Both the yen and the euro tend to do well dur­ing times of fi­nan­cial mar­ket stress, since both Ja­pan and the euro zone usu­ally run cur­rent ac­count sur­pluses. "There is a fair bit of ner­vous­ness go­ing into the Fed meet­ing. In­ter­est rate mar­kets have post­poned rate hike in 2016 and 2017 so in­vestors ex­pect some­thing dovish from the Fed, given the volatil­ity in stock mar­kets," said Niels Chris­tensen, FX strate­gist at Nordea. "Dol­lar/yen should be trad­ing with a slight down­ward bias in the com­ing few hours." In ad­di­tion to the Fed, in­vestors are also fo­cused on the Bank of Ja­pan's two-day meet­ing, which will end on Fri­day. Most ex­pect the BOJ to hold pat de­spite the in­creas­ingly wor­ry­ing eco­nomic data and stressed mar­kets, though spec­u­la­tion that it might muster ad­di­tional stim­u­lus steps has in­ten­si­fied this week. "Even if it ap­pears un­likely that the cen­tral bank will con­sider ad­di­tional pol­icy ac­tion as soon as this week, such a step can­not be ex­cluded by the April meet­ing," Credit Agri­cole strate­gists wrote in a note.

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