The U.S. Dollar Index remains poised to record the largest single week’s decline in value in as much as nine months after FX players contemplate the latest Federal Reserve minutes which clearly indicate that an increase in interest rates is no longer a certainty in early 2015. Though the Fed remains committed to tightening its monetary policy by curtailing monthly asset purchases, it is apparent that interest rate manipulation isn’t in the Fed’s tool box at the present time. Currency strategists at Societe Generale remarked that the carefully constructed plan of the Fed’s to prepare the markets for a policy shift towards normalization is in now at risk of becoming unsettled, with the result an undermining of the greenback fundamentals.
As reported at 11:06 a.m. (JST) in Tokyo, the U.S. Dollar Index was trading at 79.399 .DXY, recovering from an earlier drop to 79.330 .DXY and thus far down 1.28% on the week. The EUR/USD pair climbed to a 3-week peak at $1.3900 while the USD/JPY fell to a 3-week trough at 101.33 Yen, approaching a key support level at 101.20 Yen.
Aussie Dollar’s Momentum Slows
The Australian Dollar, which had been rallying to a 5-month peak against its U.S. rival on the back of upbeat labor data, has since retreated in the wake of disappointing economic data from China. The AUD/USD pair had earlier traded at a high of 0.9417 but has fallen back to 0.9383 by 12:00 p.m. (JST). China’s National Bureau of Statistics reported that CPI rose to 2.4% in March slightly below expectations of a rise to 2.5% from February’s 2.0%; that level is still below the Chinese government’s overall inflation target and could provide scope for additional easing though the government had recently indicated that additional easing measures would be limited.