Yen, franc gain after Fed paints a gloomy picture
June 11, 2020 @ 14:04 +03:00
The Japanese yen and the Swiss franc gained on Thursday as expectations that the global economy will recover swiftly from the coronavirus pandemic took a beating after a U.S. central bank policy meeting.
The Federal Reserve signaled it plans years of extraordinary support for the U.S. economy, which policymakers project will shrink by 6.5% in 2020, that the unemployment rate will be 9.3% at the end of this year, and that interest rates are expected to remain near zero until the end of 2022. The dire projections took the wind out of a broadening rally in stock markets over the previous two weeks and prompted investors to dump the Australian dollar and other commodity-linked currencies.
Against a basket of its rivals, the dollar weakened 0.1% to 96.04 after edging 0.2% higher in Asian trade as global stock markets weakened. Versus the Swiss franc, the dollar slipped to a three-month low and it languished near a one-month low versus the yen.
New infections in the United States showed a slight increase after five weeks of declines, according to a Reuters analysis, only part of which was attributed to more testing. “The risk of a second wave outweighed the Fed’s ‘zero forever’ message and the FX market took a distinctly risk-off mood, with a typical reaction,” said Marshall Gittler, Head of Investment Research at BDSwiss Group.
High-beta currencies heavily geared towards global growth, such as the Australian dollar and the Norwegian crown, led losers in the currency space, falling 1% in early London trading. The euro rose 0.1%, leaving open the possibility of more downside for the dollar once the dust settles. The single currency last bought $1.1385.
Yen, franc gain after Fed paints a gloomy picture, Reuters, Jun 11