Dollar May Rise Versus Yen; Federal Reserve Change Unlikely, Barclays Says

The dollar may advance against the yen and strengthen versus Australia and New Zealand’s currencies because the U.S. Federal Reserve is unlikely to change its monetary policy tomorrow, Barclays Plc said.

“We do not expect a change in policy from the Fed,” Raghav Subbarao, a foreign-exchange strategist in London, wrote in a research report today. “If the Federal Open Markets Committee announcement does not indicate any further policy easing, rate markets should retrace some of the recent rally. A jump in short-term yields should lead to a dollar rally.”

A reversal in yields should push the Aussie dollar and kiwi dollar lower against the U.S. currency, Subbarao wrote. “However, we feel the best way to position for this would be through dollar/yen, which has historically shown a high degree of correlation with short-term interest rates.”

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

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