The US dollar rose after the US Federal Reserve's massive interest rate cut, with traders awaiting decisions from the UK and Japanese central banks over the next 24 hours to assess their combined impact on markets.
The US dollar gained against most major currencies after the US Federal Reserve cut interest rates by half a percentage point, in a move usually aimed at combating crises, while paving the way for more gradual monetary easing in the future.
Sovereign bonds from the United States, Australia and Japan came under pressure, while most stock indexes in Asia fell in early trading.
“Markets are now entering a critical time with the BoJ decision being a major risk,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. “Markets are recognizing the uncertainty, so the strategy is to reduce risk by buying the US dollar, focusing on Treasuries and betting on bonds.”
US Dollar Path
The Bloomberg Dollar Spot Index rose as much as 0.4% today, extending gains for a third straight session, while the Japanese yen and Swiss franc led losses against the world’s reserve currency.
In addition to the interest rate decisions expected in the near term, investors will have to take the upcoming US elections and geopolitical risks into account as they forecast the path of the US dollar.
“The US dollar has been on a strong losing streak this quarter. The greenback could fall if other economies do better than the US. But given the state of the eurozone, China or even Canada entering recession, I don’t see the US dollar falling further for now,” said Charu Channa, Global Markets Strategist at Saxo Markets.
Yields on 10-year Treasuries rose 2 basis points to 3.72%, while yields on Japanese bonds rose 3 basis points to 0.85%. Three-year Australian bond yields advanced as much as 11 basis points to 3.57% as traders trimmed bets on a rate cut by the Reserve Bank of Australia following strong jobs data.
