The dollar index (DXY00) Wednesday rose by +0.54%. Wednesday's weakness in the yen boosted the dollar after dovish comments from BOJ Deputy Governor Himino undercut the yen. Also, a slump in stocks Wednesday boosted some liquidity demand for the dollar. In addition, the dollar is climbing on speculation investors are buying the dollar for month-end portfolio rebalancing.
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 36% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) Wednesday fell by -0.60%. The euro was under pressure Wednesday from a stronger dollar. The euro was also undercut by Wednesday’s news that Eurozone July M3 money supply growth grew at the fastest rate in 17 months, which was dovish for ECB policy.
The Eurozone July M3 money supply rose +2.3% y/y, unchanged from June and matching the largest increase in 17 months, although weaker than expectations of +2.7% y/y.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.
USD/JPY (^USDJPY) Wednesday rose by +0.51%. The yen came under pressure Wednesday due to dovish comments from BOJ Deputy Governor Himino, who said the BOJ needs to consider moves in financial markets when it adjusts policy. Losses in the yen were limited as geopolitical tensions in the Middle East continued to support the safe-haven demand for the yen.
BOJ Deputy Governor Himino said the priority of the BOJ is to watch financial markets with "utmost vigilance" and that market moves need to be considered when deciding on monetary policy.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and at +14% for the October 30-31 meeting.
December gold (GCZ24) Wednesday closed down -15.1 (-0.59%), and September silver (SIU24) closed down -0.779 (-2.60%). Precious metals Tuesday retreated due to the stronger dollar. However, losses were limited as safe-haven demand for precious metals remains strong due to Middle East tensions. Also, fund buying of gold is supporting gold prices as long gold positions in ETFs rose to a 6-month high Tuesday.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
