US Dollar Tumbles The Most In 7 Years On Federal Reserve Comments

The euro continued to climb in the Asian session adding another 4 points to reach 1.1320. The stronger than expected euro is expected to cause problems for exports and manufacturers as many except the ECB and its members to start talking down the euro. The shared currency surprised traders as well as Mario Draghi, after the central bank lowered rates and increased monetary stimulus which should have sent the euro lower but it did not hit the target. This week the US dollar was crushed by the Federal Reserve’s dovish attitude sending the greenback to trade at 94.75. The big story in financial markets is this violent drop in the U.S. dollar. The currency continues to be under pressure in Asia. The dollar fell the most in 7 years in a single session after the Feds.

Speculation about the U.S. interest rate outlook was rekindled after the U.S. currency faced a sell-off overnight in New York following the Federal Reserve statement Wednesday signalling it will take a less aggressive rate hike posture this year.

The dollar was later bought back to move above the 111-yen line. Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp., said the dollar’s recovery was boosted by “speculation that the Bank of Japan may intervene” to halt the yen’s sharp appreciation against the dollar.

The euro was almost flat against the dollar while briefly falling against the yen in tandem with the dollar-yen pair. The U.S. dollar briefly dropped to the upper 110-yen zone Friday morning in Tokyo, driven by renewed selling on speculation the U.S.-Japan interest rate gap will not widen as previously thought.

The People’s Bank of China “fixed” Friday’s USD/CNY rate at 6.4628, well below Thursday’s fixing level of 6.4961. The 333 pip decline was the strongest one-day strengthening in yuan’s starting level since November 2015. The USD/CNY is now trading at the strongest level against the US dollar since December 7 last year. Other currencies such as the Australian dollar, euro and yen have all strengthened on the back of the CNY move.

The New Zealand dollar advanced to 89.60 Australian cents from 88.96 cents yesterday, gained to 60.57 euro cents from 60.32 cents, edged up to 76.42 yen from 76.14 yen, and increased to 4.4396 yuan from 4.3991 yuan. It slipped to 47.35 British pence from 47.48 pence yesterday after the Bank of England kept interest rates unchanged and dampened speculation that its next move is likely to be a cut. The kiwi is trading at 0.6845 as traders booked profits this morning. The better than expected GDP helped the currency continue its rally.

The Aussie remains in the green at 0.7653 after strong jobs data this week and the rise in ore and commodity prices. The Aussie continued to soar amid a relentless greenback sell-off following the US Federal Reserve’s policy announcement. The Australian dollar is expected to move higher to 78 U.S. cents in the near term before losing momentum after reaching its highest level since July 2015 on broad-based U.S. dollar weakness overnight.