The US Dollar gave back some of its recently made gains against the Euro and the Japanese Yen before regaining positive momentum. Investors are experiencing a sense of unease which is primarily due to continued fallout from the recent rout in Asian equities amid the gloomy outlook for the Chinese economy. The Peoples Bank of China and the Chinese government have already taken significant steps toward stabilizing China’s economy but the fear is growing that that may be too little and too late. The situation has also tempered sentiment in favor of a rate hike from the Federal Reserve Bank which could now opt not to tighten policy.
As reported at 11:39 am (BDT) in London, the EUR/USD was trading at $1.1463, easing back from a session high of $1.1561. The USD/JPY was trading at 119.3450 Yen, closer to the low end of the day’s trading band which ranged from 118.4650 to 119.8275 Yen.
Outlook Positive for Euro and Yen
Analysts believe that given the current uncertainty, and also the fact that the Yen and Euro are often used in carry trades, both currencies will be supported against the Dollar. One market analyst in Tokyo believes that especially the Euro will continue to gain support during periods of risk aversion, especially given that it is a highly liquid currency, courtesy of the ECB’s massive easing efforts.