By: Barbara Zigah

Ahead of the Federal Reserve’s unprecedented pledge to hold interest rates at the current record for a minimum of 2 years, the U.S. Dollar had edged up against the commodity-linked Australian Dollar. The bounce was limited, though, as the Fed basically reaffirmed the U.S. Dollar’s status as the carry-trade currency of choice. The Fed decision sparked an equity rally on Wall Street, and helped the higher risk Australian Dollar recoup recent losses. As reported at 12:45 p.m. (JST) in Tokyo, the Australian Dollar was trading 0.5% lower against the U.S. Dollar, at $1.0340, though earlier in the session it had traded above $1.0400, managing to recoup nearly half of its recent losses.

Safe haven currencies are still seeing exceptional volatility; the Japanese Yen rose 0.2% against the greenback to 76.81 Japanese Yen, close to mid-March’s historical 76.25 Japanese Yen high. Some analysts believe that the Yen is likely to strike a new record high, even as investors expect that the Bank of Japan could intervene in their currency’s appreciation. One analyst expects that investors could intentionally “test” the Bank of Japan’s resolve. Clearly, as the weakness of the U.S. currency persists, the Japanese Yen will continue to be viewed as a safe-haven currency until the U.S. economy shows positive signs of recovery.