Dollar continues slide as risk-sensitive currencies recover

The dollar was back under pressure Wednesday as a firmer tone for equities and other assets perceived as risky lifted risk-sensitive rivals.

On Tuesday, financial markets were shaken by economic data from China showing a slowing of economic activity in 2018 to a 28 year low, as well as reports that U.S. officials had canceled or turned down a preparatory trade meeting with Chinese counterparts. White House economic adviser Larry Kudlow later denied this cancellation.

The ICE U.S. Dollar Index DXY, +0.02% was slightly weaker, dipping 0.1% to 96.221, adding on from Tuesday’s slight loss. Its main rival, the euro EURUSD, -0.0088% was slightly stronger at $1.1368, up from $1.1362.

Currencies like the Australian dollar AUDUSD, +0.1123% and Canadian dollar USDCAD, -0.0449% which tend to perform better when appetite for assets perceived as risky is on the rise, recovered from their respective slides on Wednesday.

The Japanese yen USDJPY, +0.48% weakened against the U.S. dollar on Wednesday, after gaining the previous day on haven-related buying. Ahead of the Asian market open, the Bank of Japan announced it kept its monetary policy steady, maintained its yield curve control and asset purchases.

“Just like their other central bank peers, the BOJ saw more downside in the economy. While the central bank did raise their GDP forecasts, they slashed their inflation outlooks all the way through 2020/2021, showing no signs of optimism of getting near their target of 2%. The BOJ is running out of options to defeat inflation and may rely on hoping oil prices remain stable,” wrote Edward Moya, market analyst at Oanda.

One dollar last bought ¥109.66, up from ¥109.37 late Tuesday in New York.

The British pound GBPUSD, +0.7024% again vied for the crown of best major currency performer of the session, breaking above the $1.30 threshold for the first time since November on Wednesday. Sterling last fetched $1.3038, up from $1.2955.

While the Brexit gridlock continues ahead of next week’s vote on Prime Minister Theresa May’s alternative deal, market expectations of an extension of article 50 — the treaty article that allows the U.K. to leave the European Union within two years of triggering it — and a receding risk of a no-deal Brexit continue to rise.

Former Chancellor of the Exchequer George Osborne — a remainer — told the BBC that he believed a Brexit delay was most likely, while current U.K. trade secretary Liam Fox — a leaver — said that delaying Brexit would be worse than getting no deal.

Marketwatch

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya