Dollar Advances to Six-Year High Versus Yen on Fed; Franc RisesLucy Meakin and Kristine Aquino
The dollar climbed to a six-year high versus the yen, reaching levels unseen since the collapse of Lehman Brothers Holdings Inc., after Federal Reserve officials yesterday raised their target-rate forecast.
The greenback headed for the highest closing level in four years versus major peers after the Fed increased its median estimate for the key interest rate to 1.375 percent at the end of 2015 versus June’s forecast for 1.125 percent. The yen fell as Bank of Japan Governor Haruhiko Kuroda reiterated comments on monetary easing. Switzerland’s franc rose after the nation’s central bank kept rates unchanged and pledged to maintain the currency’s cap versus the euro. South Korea’s won weakened.
“This hawkish twist to the Fed is pushing the greenback higher, and at the same time all its major peers are looking structurally weak at the moment,” said Stan Shamu, a markets strategist in Melbourne at IG Australia, a unit of IG Group Holdings Plc. “The U.S. dollar is probably going to continue in very good form.”
The U.S. currency gained 0.2 percent to 108.61 yen as of 9:17 a.m. London time after reaching 108.87 yen, the highest since Sept. 8, 2008. The dollar weakened 0.2 percent to $1.2884 per euro after appreciating to $1.2835, the strongest level since July 2013.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, rose as much as 0.3 percent to 1,056.87, poised for the highest closing level since June 2010.
The Federal Open Market Committee retained a commitment to keep interest rates near zero for a “considerable time” after winding down a bond-purchase program under the quantitative-easing stimulus strategy. It said in a statement a “significant underutilization of labor resources” remains.
Policy makers tapered monthly bond buying to $15 billion in their seventh consecutive $10 billion cut, staying on course to end the program in October.
Fed Chair Janet Yellen, speaking at a press conference after the two-day meeting, said the language of the low-rate pledge isn’t a form of calendar-based guidance. The odds the central bank will increase its benchmark interest-rate target to at least 0.5 percent by July 2015 were 78 percent, up from 73 percent at the end of last month, federal fund futures showed yesterday.
The dollar advanced most against Asian currencies, pushing the Bloomberg-JP Morgan Asia Dollar Index down to as low as 115.61, the least since June 25.
South Korea’s won slid to the weakest level since April. It depreciated 0.8 percent to close at 1,043.14 per dollar in Seoul, according to data compiled by Bloomberg, after touching 1,043.32, the weakest since April 16. Malaysia’s ringgit fell to a four-month low, declining as much as 0.7 percent to 3.2439 per dollar, the least since May 9.
The BOJ’s Kuroda said today that the central bank will continue monetary stimulus until it achieves its target of 2 percent inflation. He was speaking at the National Securities Industry Convention in Tokyo. A stronger dollar isn’t negative for Japan’s economy, Kuroda said Sept. 16 in Osaka.
The Swiss currency climbed as the nation’s central bank maintained its 1.20 per euro cap on the franc and vowed to deploy unlimited purchases to defend it. The Swiss National Bank also kept its interest-rate target range at 0 to 0.25 percent at its policy review today, as forecast by all but one of 20 economists surveyed by Bloomberg
The franc appreciated 0.4 percent to 93.76 centimes against the dollar and strengthened 0.2 percent to 1.20786 per euro.
The pound was little changed as polling stations opened in Scotland for voters to decide on the future of a political union that dates back to 1707. Voting ends at 10 p.m. local time. A final batch of opinion polls before the referendum showed the “no” campaign remained in the lead by a slim margin.
“Uncertainty around the final result is mounting,” Shinichiro Kadota, a foreign-exchange strategist at Barclays Plc in Tokyo, wrote in an e-mailed note to clients today. The pound “will likely rebound further in case of a ‘no’ vote, though it has already seen some rebound in the past few days, while a ‘yes’ vote would likely exert further downward pressure.”
Sterling was at $1.6298 and 79.05 pence per euro.
The euro touched its weakest level versus the dollar since July 2013 before the European Central Bank allots the first funds under its targeted lending program.
The ECB will announce the allotment of the first funds under its so-called targeted longer-term refinancing operations, as part of its effort to stave off deflation in the euro area. Banks will receive 150 billion euros, according to the median estimate of analysts surveyed by Bloomberg News.