Yesterday the dollar continued to hover at two-week lows against the other major currencies, after the release of disappointing U.S. jobless claims data and as the Federal Reserve’s decision to leave its monetary policy unchanged continued to weigh on the greenback.
USD/JPY, on the other hand, pared sharp losses, as investors received a full day to digest the Fed decision ahead of a meeting from the BoJ to close the week.
The Yen initially soared against the Dollar, amid signals that the Bank of Japan could fail to meet market expectations by approving only moderate easing measures at a highly-anticipated meeting on Friday. While Abe unveiled a broad ¥28 trillion stimulus plan on Wednesday, Reuters reported that the Japanese government may only provide as much as ¥7 trillion in direct fiscal stimulus.
If Abe is unable to deliver on promises of jumpstarting the economy with a broad stimulus initiative, the Japanese Central Bank could feel added pressure to lower interest rates deeper into negative territory. The Yen has gained nearly 13% against the U.S. Dollar year-to-date.
During the Asian session the safe-haven yen jumped against the dollar after the Bank of Japan’s monetary policy easing disappointed investors who had been hoping for more radical stimulus measures.
Gold settled at $1,341.65, up 0.54% on the session. Gold spiked in Wednesday’s after-hour session after the Federal Open Market Committee (FOMC) left its benchmark Federal Funds Rate unchanged at a level between 0.25 and 0.50% at the conclusion of its July monetary policy meeting. Despite noting that near term risks to the economic outlook have diminished over the last month, the FOMC said it still expects that economic conditions may only warrant gradual increases in short-term interest rates in the coming months.
Crude futures fell sharply, as furhter signals of global oversupply dragged oil prices to levels not seen since a failed Doha summit in mid-April.
WTI dropped 1.81% on the session and Brent settled at $43.24 or 1.53% down on the day.
U.S. stocls were relative flat yesterday as plunging oil prices limited gains.