Now that some calm has resumed among the global equity markets, the stampede toward safe haven currencies has reversed trend. As a result, the Japanese Yen suffered some losses versus the US Dollar. The Euro also came under pressure as investors unwound their carry trades. Market sentiment was also generally improved after one official from the Federal Reserve Bank downplayed the likelihood of an imminent rate hike.
As reported at 11:20 am (BDT) in London, the USD/JPY pair was trading at 120.2720 Yen, a gain of 0.06%. Earlier this week, the pair hit a 7-month trough at 116.15 Yen. The EUR/USD was down at $1.1287, a fall of 0.22% and not far from the session low of $1.1275; the pair’s high was at $1.1364, well off the weekly peak of $1.1715, a fresh 7-month peak.
Focus turns to Monetary Policy
Analysts say that focus is shifting away from China and back to the central banks. Markets would welcome more dovish commentary from the world’s central bankers in order to counterbalance the Chinese tension. On Wednesday, the head of the New York Federal Reserve Bank branch said that given the recent market upheaval, a rate hike seemed less appropriate next month. Equity investors, in general, prefer a loose monetary environment and any possibility of tightening tends to curtail activity in the stock market.