The US dollar bounced back against the British pound and euro as minutes from the Federal Reserve’s earlier policy meeting surprised some investors by keeping the possibility of a dollar-positive stimulus taper in December on the table.
The greenback found further support against a sinking Japanese yen. The US dollar jumped to a one-week high against the euro after talk emerged of the European Central Bank potentially launching a negative deposit rate to stimulate the euro zone economy at its next meeting.
The news has pushed sterling back towards a recent nine-month high against the euro, a position it may just hold if UK economic reports meet estimates. The pound jumped to August 2009 highs against the yen, supported earlier in the day by minutes from the Bank of England.
Currencies exposed to Chinese demand such as the Australian dollar have opened lower after Chinese manufacturing data missed forecasts to show slower growth. The so-called Aussie and its New Zealand counterpart could face another negative reaction with one member of New Zealand’s central bank set to discuss exchange rates.
Sterling
The pound fell from a three-week high after minutes from the Federal Reserve gave markets a little more taper talk than they had positioned for, allowing a weak US dollar to rebound. But the pound has jumped to August 2009 peaks against the yen after the Bank of Japan reaffirmed its aggressive monetary easing plan following its latest policy meeting. Euro/sterling could be the cross to watch after minutes from the Bank of England kept investors looking forward to an eventual interest rate hike in the UK. In contrast, the European Central Bank was reported to be considering using negative deposit rates to stimulate the eurozone economy.
US dollar
The US dollar bounced back, cruising through the century mark against the yen to hit a four-month high after minutes from the Federal Reserve kept alive the possibility of a stimulus taper starting next month. The greenback has also jumped to a one-week high against the euro, giving the US currency support in other crosses such as sterling, following talks of another ECB rate cut.
Euro
Better-than-expected PMI data from Germany has lifted the euro, with the single currency likely to move higher if PMI figures for the wider eurozone economy ease concerns about Europe’s economic recovery faltering. The euro plunged out key trading levels against the US dollar and pound amid reports that the European Central Bank may introduce negative deposit rates at its December meeting. A negative rate, possibly just -0.1 per cent, would aim to discourage banks from parking large deposits and therefore lend more. Such a move would be unprecedented.