A slightly softer US dollar exploded to 13-year highs against its Norwegian counterpart after the country’s central bank unexpectedly slashed interest rates. Norway’s central bank cut its key rate to 0.75 per cent from 1.0 per cent to shore up its oil-battered economy. An otherwise mildly subdued US currency held below multi-week peaks against the euro. Europe’s single currency got a boost from the European Central Bank’s signalling of a readiness but not a willingness just yet to strengthen its already potent monetary policies. Canada’s loonie steadied after a fall to fresh 11-year lows. America’s economy and central bank chief will be in focus to help give the dollar a more fundamental footing.

Euro

Draghi wrong-footed investors, causing the euro to rally by as much as 1.5 per cent against Sterling and 0.7 per cent against the US dollar. Expectations were that ECB president Mario Draghi would use the monetary policy speech to lay the groundwork for more Quantitative Easing in the eurozone. However, Draghi said that while risks from emerging markets (China) are being closely monitored, it was too early to decide on whether more stimulus was required. The change in mood comes as some ECB members reject calls for the ECB to ramp up stimulus, only eight months after quantitative easing was launched back in January.

US dollar

The US dollar fell sharply on September 17 when the Federal Reserve held off from raising rates amid financial market volatility related to China. This hurt the US dollar and allowed the euro to rally and Sterling to jump to three-week highs. But since the sell-off the US dollar has bounced back, gaining by over three per cent and two per cent against the euro and Sterling respectively.

Swiss franc

The Swiss franc slid one per cent against the euro on Wednesday after ECB president Mario Draghi said it was too early to discuss the need for more ECB Quantitative Easing which boosted the euro. Meanwhile rumours of Swiss National Bank intervention spooked franc traders. On September 11, the franc fell to its worst levels in 2015 versus the euro but has since rallied. But rumours surfaced that the SNB may have stepped in to keep the franc weak. China also reportedly intervened to lift the CNY and stop the currency from weakening further.

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