All eyes will focus on the US later today a slew of data is expected namely the MBA mortgage applications, Housing starts, Building permits and most importantly the outcome of the FOMC policy which may infuse high volatility in the dollar in intraday and over the upcoming US session. The FOMC will also announce its rate decision which is expected to remain at the 0.25 % levels though its comments and view’s regarding tapering of the MBS program and US economic growth will be watched critically. Overall we expect the rupee to trade in a range for the day with a negative bias. Ahead of today’s data and news traders have begun to take position. The US dollar is moving between small gains and losses holding close to the 81.30 level. The dollar struggled against most currencies on Tuesday as investors were reluctant to make fresh bets ahead of the outcome of a Federal Reserve meeting expected to result in a reduction of its massive stimulus program.
The euro, on the other hand, rose after an upbeat German sentiment survey. The ZEW poll of economic sentiment rose to its highest since April 2010, suggesting a growing sense of stability that could support German Chancellor Angela Merkel’s chances of winning a third term in Sunday’s elections. The euro’s gains, however, were limited in the run-up to the Fed’s two-day policy meeting, which started on Tuesday. A recent poll showed economists expect the Fed to reduce its $85 billion in monthly asset purchases by a relatively modest $10 billion. The euro eased a bit in the Wednesday morning Asian session but remains close to yesterday’s trading session at 1.3353
A separate report showed foreign investors rediscovered a taste for long-term U.S. securities as Japan’s and China’s holdings of U.S. government bonds increased. In June, U.S. Treasuries had suffered a record outflow. According to Treasury data released on Tuesday, foreign holdings of long-term U.S. securities increased by $31.1 billion in July after plunging by $67 billion the prior month.
The GBP is trading at 1.59 flat this morning taking cues from strength in the DX and mixed economic data from the country. The currency touched an intra-day high of 1.5935 and closed at 1.5901 in the yesterday’s trading session. UK’s Consumer Price Index (CPI) was at 2.7 percent in August as against a rise of 2.8 percent in July. Producer Price Index (PPI) Input declined by 0.2 percent in August from rise of 1.2 percent a month ago. Retail Price Index (RPI) gained by 3.3 percent in last month as compared to 3.1 percent in July.
The Japanese yen is trading 99.25 but within its weekly range. There has been little economic data from Japan with the government and the Bank of Japan deal with economic reforms. Prime Minister Abe approved the sales tax increase and now the government is reviewing a possible corporate tax decrease to help stimulate economic growth. Abe ordered government officials to develop a stimulus plan to help any negative effects caused by the tax increase.
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