Rate Hike Hopes Dashed, Dollar Drops

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Includes: UDN, UUP
by: Daily Forex

Investor speculation following the stronger than expected recent U.S. jobs data, that the U.S. Federal Reserve Bank might consider raising key interest rates from their historic lows, was dashed.

Yesterday, confirmation came from the head of the Federal Reserve Bank, Ben Bernanke, as well as N.Y. Federal Reserve Bank President, William Dudley, who both reiterated that the American economy continues to face much difficulty and that there remains the possibility of continued high unemployment rates. As such, they insisted, the low rates needed to remain to stimulate the economy. Markets reacted quickly to the comments, and the U.S. dollar slipped in Sydney trading as a result.

As reported at 11:22 a.m. in Sydney, the U.S. Dollar Index, which is a measure of the greenback’s strength versus six major currencies, slipped to 75.721 .DXY, a decline of .25%. Higher-risk currencies moved up on the dollar, including the single currency Euro which traded at $1.4833, up from $1.4811 in New York trading yesterday. The Australian and New Zealand dollars also moved up on the U.S. dollar, with the Aussie trading at $0.9150 up from late Monday’s trade of $0.9116. The Australian Reserve Bank Governor, Glenn Stevens, is expected to hold a news meeting this morning at 9:25 a.m. (GMT), and investors are anxious for the outcome.

Disclosure: No positions