Safe-haven yen gains in cautious mood ahead of Fed
The safe-haven yen gained on Tuesday, hitting a seven-week high against the euro, as investors turned risk-averse before the start of a two-day meeting of the U.S. Federal Reserve.
Markets are pricing in only around a 7 percent chance of a U.S. rate hike this week, but they will be watching Fed Chair Janet Yellen closely for any clues to whether “lift-off” could come at its next meeting in December.
The yen had fallen last week, hitting a two-month low against the dollar after the European Central Bank said it was ready to loosen policy further and China cut interest rates again, fuelling speculation that the Bank of Japan could signal more easing at its meeting on Friday.
Euro sags as euro zone inflation turns negative in Sept
The euro lost ground on Wednesday as data showing euro zone inflation dipped back into negative territory in September fuelled expectations the European Central Bank will expand or extend its asset purchase programme.
The euro fell 0.4 percent to $1.1205, and was down 0.7 percent against the British pound, although it remained on track for a quarterly gain against the dollar.
“A weak number was expected and bolsters expectations that the ECB may have to expand its asset purchase programme from the 60-billion-euros-a-month to something larger, perhaps by year-end,” said Richard Falkenhall, currency strategist at SEB.
“That is negative for the euro, but a lot depends on how stock markets behave. If stocks drop, then the euro is likely to be supported as they are going in opposite ways.”.
Sterling trades above $1.52, but lags euro on soft UK data
Sterling rose 0.4 percent against a struggling dollar on Tuesday, as investors fretted about when the U.S. Federal Reserve will raise interest rates amid growing doubts over a global recovery.
The International Monetary Fund (IMF) cut its global growth forecasts for a second time this year on Tuesday, citing weak commodity prices and a slowdown in China and said policies aimed at increasing demand were needed.
| Important events and their explanation: |
| Time ( IST) | Currency | Economic Data | Actual | Expectation | Previous |
| 5:20am | JPY | Retail Sales y/y | 0.40% | 0.80% | |
| 6:00pm | USD | Goods Trade Balance | -64.9B | -67.2B | |
| 8:00pm | USD | Crude Oil Inventories | 8.0M | ||
| 11:30pm | USD | FOMC Statement | |||
| USD | Federal Funds Rate | <0.25% | <0.25% |
Explanation:- All eyes are on the FOMC statement as there would be no change in the rate decision. But the important thing is Fed’s indication towards the December 2015 meeting. China’s weak economy may hinder rate hike. Any dovish statement by the Fed would be negative for the dollar and positive for commodities.
| Quick Glance : |
| Instrument | Price | %Chg | Volume | OI |
| USD/INR | 64.98 | 0.17 | 788526 | 960103 |
| EUR/INR | 71.89 | -0.82 | 37048 | 48836 |
| GBP/INR | 99.63 | 0.07 | 21059 | 41217 |
| JPY/INR | 0.5398 | -0.64 | 7908 | 15311 |
| Technical touch : |
USDINR
USDINR pair ended on a flat notes under 65.00 levels after a lackluster trade. As said previously, pucialair is trading at its crucial rising trendline resistance. Hence we advice to go long on dips near 64.80 levels till 65.34-80 targets.
