US Dollar recovers after Fed's Brainard quells rate rise chatter
Frankfurt (Sept 13) The dollar recovered ground inEurope on Tuesday, having dipped the previous day following aspeech by Federal Reserve policymaker Lael Brainard thatsolidified the view that U.S. interest rates are unlikely torise this month.
There had been much speculation among traders that thespeech by Brainard, announced at the last minute before the U.S.central bank's pre-meeting blackout period, could see one of itsmost convinced policy doves flip to support monetary tightening.
In the event, she instead warned against the Fed removingsupport for the economy too quickly, knocking the greenback halfa cent lower. The effect had faded by the start of European trade and thedollar traded 0.3 percent higher against the yen and 0.2 percentagainst a basket of currencies.
"We've had so much information and misinformation (on thechances of a rate rise) that the market is just in wait-and-seemode," said Neil Mellor, a strategist for Bank of New YorkMellon in London.
"We've had a number of supportive comments from the policyhawks, but they are still struggling to convince the market. Thedollar is right in the middle of the recent ranges."
At 1100 GMT, the euro was trading flat at $1.1236 while the dollar fetched 102.19 yen. Sterling was the biggest mover in morning trade inEurope, down over half a percent against both the euro and thedollar after lower than expected inflation numbers which pointedto the economy's weakness rather than a bump due to thecurrency's weakness since June's vote to leave the EuropeanUnion.
The Aussie dollar , surprisingly strong through aperiod when expectations for easier monetary policy there havegrown, was also down 0.4 percent. Other commodities-linkedcurrencies including the Canadian and New Zealand dollars werealso lower as oil prices fell around 2 percent.
Manuel Oliveri, a strategist at Credit Agricole in London,said all of those moves look tied up with a wobble in globalmarkets related to concerns about overpricing of governmentbonds and the ability of central banks forever to pump moremoney into the financial system.
"Risk sentiment is a bit more stable today but generallythere is this doubt," he said.
"U.S. stocks futures are down in contrast to Europeanmarkets. That is on the back of rising uncertainties aboutcentral banks' ability to stimulate their economies and ofcourse the speculation that the Fed is getting closer to a risein rates."
Futures pricing for a rise in September was down below 20percent ahead of the Brainard speech, and it dipped to around 15percent afterwards.
"We can stick with our main scenario that the Fed won'traise rates in September," said Koichi Yoshikawa, executivedirector of finance at Standard Chartered Bank's Tokyo branch."All the talk about a possible rate hike in September turned outto be noise."
Source: Reuters
