Currency Insight

Dollar edges up near 2-1/2-month high ahead of Fed outcome

The dollar edged closer to a 2-1/2-month high against a basket of currencies on Wednesday as traders awaited clues from the Federal Reserve about the timing of a U.S. interest rate increase.

A rate hike at the Fed’s two-day policy meeting which ends later on Wednesday is virtually priced out due to underlying concerns over a slowdown in China and the broader impact on global growth.

But many investors still expect the Fed to indicate that interest rates could rise as early as December. The index, which gauges the greenback against six rival currencies, stood at 96.958 , up about 0.1 percent from late U.S. trade and not far from a 2 1/2-month peak of 97.201 scaled on Friday.

Sterling hits 8-month low vs euro as consumer prices fall

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
All Day EUR German Prelim CPI m/m -0.10% -0.20%
1:30pm EUR Spanish Flash CPI y/y -0.60% -0.90%
2:25pm EUR German Unemployment Change -4K 2K
3:00pm GBP Net Lending to Individuals m/m 4.4B 4.3B
6:00pm USD Advance GDP q/q 1.60% 3.90%
USD Unemployment Claims 264K 259K
USD Advance GDP Price Index q/q 1.50% 2.10%
6:40pm USD FOMC Member Lockhart Speaks FOMC Member Lockhart Speaks
7:30pm USD Pending Home Sales m/m 1.10% -1.40%


Explanation:- Out of the above mentioned data , Market may react more on US unemployment numbers and Pending home sales. We assume both the data will come as per the expectations, hence this would be neutral for the USD. All eyes are on the upcoming FOMC statement.

Quick Glance :
Instrument Price %Chg Volume OI
USD/INR 64.92 0.17 788526 960103
EUR/INR 71.82 -0.82 37048 48836
GBP/INR 99.25 0.07 21059 41217
JPY/INR 53.93 -0.64 7908 15311


Technical touch :


Dollar Index


Today we will discuss INR movement based on Dollar index. As seen Dollar index is forming a perfect bullish pattern on its weekly chart, and touched its above falling resistance line. We assume dollar index might fall in the coming days near its base. This would be positive for the INR for few trading sessions. Range :- 64.88-65.20