Dollar Gains for Sixth Day as Merciful Fed Recharges Bulls
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(Bloomberg) — With no harsh surprises out of the Federal Reserve, currency traders are back on 2015’s favorite trade: buy dollars.
A gauge of the greenback climbed for a sixth day on Thursday, a day after a unanimous vote by the Federal Open Market Committee to raise its benchmark rate for the first time since 2006 with policy makers leaving unchanged the implication of four quarter-point increases next year. While Chair Janet Yellen emphasized a gradual path to future tightening, she didn’t derail the theme of divergence with other major central banks that’s made the dollar this year’s biggest gainer after the Swiss franc.
“The Fed is intent on tightening policy more than anticipated by futures markets,” said Mansoor Mohi-uddin, a senior markets strategist at Royal Bank of Scotland Group Plc in Singapore. “The dollar will continue to gain support, particularly against commodity currencies, Asian emerging-market currencies and the euro.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, climbed 0.3 percent to 1,233.49 as of 10:16 a.m. in Tokyo Thursday. It has climbed 9 percent this year.
A gauge of the greenback climbed for a sixth day on Thursday, a day after a unanimous vote by the Federal Open Market Committee to raise its benchmark rate for the first time since 2006 with policy makers leaving unchanged the implication of four quarter-point increases next year. While Chair Janet Yellen emphasized a gradual path to future tightening, she didn’t derail the theme of divergence with other major central banks that’s made the dollar this year’s biggest gainer after the Swiss franc.
“The Fed is intent on tightening policy more than anticipated by futures markets,” said Mansoor Mohi-uddin, a senior markets strategist at Royal Bank of Scotland Group Plc in Singapore. “The dollar will continue to gain support, particularly against commodity currencies, Asian emerging-market currencies and the euro.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, climbed 0.3 percent to 1,233.49 as of 10:16 a.m. in Tokyo Thursday. It has climbed 9 percent this year.
Dollar Rebound
The greenback rose 0.3 percent to $1.0878 per euro and 0.2 percent to 122.50 yen. It advanced 0.5 percent 67.62 U.S. cents per New Zealand dollar and 0.4 percent to 72.07 cents against Australia’s currency.
The U.S. dollar gauge had weakened earlier this month as some traders anticipated a sell-off in the currency once the central bank announced its decision to set the new target range for the fed funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. Hedge funds and other large speculators cut their bullish greenback positions in the last two readings of data from the Commodity Futures Trading Commission.
At the start of this month, foreign-exchange markets had to contend with a European Central Bank decision that was less dovish than had been anticipated, sending the euro surging the most since 2009 against the dollar.
The FOMC decision met expectations in “mercifully” suggesting little to impact the dollar’s path next year, John Normand, head of foreign exchange, commodities and international rates research at JPMorgan Chase & Co., wrote in a note.
“For the first time in a year, however, we are at least relieved that Fed doesn’t seem on the cusp of a policy surprise that might upend perhaps the most consensus and profitable position still left in markets,” London-based Normand wrote.
The U.S. dollar gauge had weakened earlier this month as some traders anticipated a sell-off in the currency once the central bank announced its decision to set the new target range for the fed funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. Hedge funds and other large speculators cut their bullish greenback positions in the last two readings of data from the Commodity Futures Trading Commission.
At the start of this month, foreign-exchange markets had to contend with a European Central Bank decision that was less dovish than had been anticipated, sending the euro surging the most since 2009 against the dollar.
The FOMC decision met expectations in “mercifully” suggesting little to impact the dollar’s path next year, John Normand, head of foreign exchange, commodities and international rates research at JPMorgan Chase & Co., wrote in a note.
“For the first time in a year, however, we are at least relieved that Fed doesn’t seem on the cusp of a policy surprise that might upend perhaps the most consensus and profitable position still left in markets,” London-based Normand wrote.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Netty Ismail in Singapore at nismail3@bloomberg.net To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Naoto Hosoda
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