The US Dollar Index rose close to an 11-year peak after the Peoples Bank of China announced an interest rate cut. That rate drop also sent the New Zealand and Australian Dollars higher, albeit briefly. Analysts say that China’s lackluster economic growth is what is spurring the central bank there to ease further, a very distinct divergence from the tightening policy of the Federal Reserve. Analysts are pointing out that FX traders would be wise to be wary of a surprise move from the Reserve Bank of Australia which initially was expected to maintain the status quo at their policy meeting this week; the dismal data from China along with their own tepid economic results could be a factor.
As reported at 9:16 am (GMT) in London, the U.S. Dollar Index was trading at a high of 95.505 .DXY, a level not seen since the third quarter of 2003, before slipping to 95.376 .DXY. The USD/JPY was trading at 119.965 Yen, a gain of 0.2% and a fresh 2-week peak. The AUD/USD and the NZD/USD were both trading lower at 0.7791 and 0.7537, respectively.
Draghi in Focus
Markets will focus on the outcome of this week’s European Central Bank policy decision. Analysts believe that Mario Draghi, the president of the ECB, will lay out his plans for yet another massive bond purchasing scheme intended to jump start the Eurozone’s stagnating economy.