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21 Oct 2014
USD rise undermined in the near-term by pullback in US yields - BTMU
FXStreet (Łódź) - According to Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, the USD upward momentum has been hampered by the drop in US yields.
Key Quotes
"(It) has been driven by a pick-up in safe haven demand and the more dovish outlook for Fed monetary policy. The Fed is still expected to end QE this month but is now not expected to begin raising rates until late in 2015."
"The implied yield on the December 2015 Fed fund futures contract has declined sharply to just above 0.4% from just below 0.8% at the end of last month."
"As a result, investor expectations for monetary policy divergence in the year ahead between the Fed and the other major central banks of the BoJ and ECB have been scaled back dampening support for a stronger US dollar."
"Delayed expectations for monetary tightening by the Fed should also help to ease concerns over a potential tightening in external financing conditions benefiting currencies from countries with elevated current account deficits such as the Turkish lira and South African rand."
"However, building investor concerns over slowing global growth especially in emerging markets and the recent pick up in financial market volatility both still caution against re-establishing carry trades in the near-term."
Key Quotes
"(It) has been driven by a pick-up in safe haven demand and the more dovish outlook for Fed monetary policy. The Fed is still expected to end QE this month but is now not expected to begin raising rates until late in 2015."
"The implied yield on the December 2015 Fed fund futures contract has declined sharply to just above 0.4% from just below 0.8% at the end of last month."
"As a result, investor expectations for monetary policy divergence in the year ahead between the Fed and the other major central banks of the BoJ and ECB have been scaled back dampening support for a stronger US dollar."
"Delayed expectations for monetary tightening by the Fed should also help to ease concerns over a potential tightening in external financing conditions benefiting currencies from countries with elevated current account deficits such as the Turkish lira and South African rand."
"However, building investor concerns over slowing global growth especially in emerging markets and the recent pick up in financial market volatility both still caution against re-establishing carry trades in the near-term."