General Commentary
The EUR/USD dipped by 2 points to trade at 1.2846 as traders continue to worry about the disappointing PMI releases yesterday. German Ifo business confidence survey results for September were released. After the data, the Euro fell against its major rivals. Federal Reserve Chair Janet Yellen says she wants investors to be prepared for the possibility that the Fed will raise interest rates sooner than they currently project. Her words are going unheeded.
Volatility across stocks, bonds and currencies worldwide is close to record or multi-year lows, even after Yellen cautioned last week that the Fed’s commitment to keep interest rates near zero for a “considerable time” could change if U.S. economic performance continues to exceed expectations.
Officials, who project the fed funds rate will rise next year for the first time since 2006, are debating a change to their forward guidance. The rate represents the cost of overnight loans in the interbank market.
The AUD/USD remains below the 89 level adding 14 points this morning to trade at 0.8854 against a very strong US dollar, which closed near a recent high on Tuesday and gave back a few points this morning in the early session as traders booked profits. The US dollar is trading at 84.76. Iron ore prices continue to decline on an implied lack of demand from China, as traders worry about China’s economic situation after the government came out and said no more stimulus. A weaker Australian dollar and the re-emergence of Chinese buyers are tipped to fuel the renewed offshore takeover interest in local companies this year.
The currency’s lowest level for the year has been 0.8660 which was set back on January 24. Should its recent slump force it below that marker, the unit will be at its weakest point since July 2010.
The USD/JPY eased by 25 points to trade at 108.65 against the strong US dollar. The yen remains very weak but it looks like traders pushed it beyond its actual value and the markets are making a correction after the pair climbed over the 109 level. The government’s goal has been a steady yen around 105 and even exporters are becoming worried about the weak yen causing wider problems throughout the economy. The manufacturing sector in Japan continued to expand in September, although at a slower pace, preliminary survey results from Markit Economics revealed on Wednesday with a PMI score of 51.7. That’s down from 52.2 in August, although it remains above the line of 50 that separates expansion from contraction. Among the individual components of the survey, there was moderate improvement in business conditions and solid growth in manufacturing output.
