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FOREX-Yen rallies after BoJ keeps policy steady, dollar struggles post-Fed

Thu, 19th Sep 2019 08:43

* BoJ signals more easing later this year

* Dollar struggles to gain on Fed's mixed messages

* Norway's crown, British pound steady before c.bankmeetings

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes

LONDON, Sept 19 (Reuters) - The Japanese yen rallied onThursday after the Bank of Japan kept interest rates on hold,while the dollar struggled to move higher despite the FederalReserve offering mixed signals about the path for furthereasing.

Elsewhere, the Norwegian crown is in focus as the centralbank meets - the forecast is for the Norges bank to hike rates -while in Britain the Bank of England gives its policy decisionlater amid prolonged uncertainty about the Brexit outcome.

The Bank of Japan kept monetary policy steady - as expected- and signaled the chance of expanding stimulus as early as itsnext policy meeting in October by issuing a stronger warningover the risks threatening the economy.

But some in the market had expected the BoJ to signal astronger chance of more stimulus in the context of central bankseasing globally to boost growth.

"The BoJ did not sound as pessimistic (as expected), theydidn't strongly hint at easing steps to come," said Thu LanNguyen, a currencies analyst at Commerzbank.

The yen rose to as high as 107.79 yen before settling at108.06, up 0.4% on the day.

The dollar dipped slightly against a basket of currencies,as it struggled to gain despite a more hawkish than forecasttone from Wednesday's Federal Reserve meeting.

The U.S. central bank, on a 7-3 vote, lowered the Fed fundstarget rate to a range of 1.75% to 2.00% "in light of theimplications of global developments for the economic outlook."

However, Fed Chairman Jerome Powell described U.S. prospectsas "favourable" and the rate move as "insurance." His remarkswere not as dovish as markets had hoped for which lifted bondyields and - initially - the dollar.

On Thursday the dollar was down 0.1%, its index at 98.481, while against the euro it was 0.1% lower at $1.1037.

Analysts still see the dollar holding up well despite thereduced likelihood of more rate cuts.

"In the short term, this hawkish cut should still see thedollar well-bid, given that the path of interest rates outlinedby the Fed is not close to that priced into the markets," saidJohn Veils, Americas FX and macro strategist at BNY Mellon.

The Australian dollar had its worst day in a monthas expectations for more central bank rate cuts leapt afterjoblessness hit a one-year high.

The Aussie dropped 0.7% to a two-week low of $0.6782.

Norway's crown fell against the euro and dollarbefore the Norges bank decision at 0800 GMT.

Sterling was flat at $1.2468. British retail salesnumbers are due at 0830 GMT, and the Bank of England policyannouncement at 1100 GMT.(Additional reporting by Tom Westbrook in Singapore; Editing byAngus MacSwan)

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