The US dollar was left nursing its losses during Friday’s Asian session, after the Federal Reserve kept interest rates at zero and adopted a more cautious tone with respect to future rate moves.
The Fed cited global economic and financial developments in keeping interest rates at zero and forecast an even lower trajectory for future interest rate moves. Low inflation also played a role in the Fed’s decision. Weakness in emerging market economies and particularly China was specifically mentioned by the Chair Janet Yellen in her post-meeting press conference.
The euro was circling the 1.14 level versus the dollar, having rallied to 1.1440 in the aftermath of the Fed’s announcement. Dollar / yen was below 120 at 119.67 while the pound was driven back below 1.56 to 1.5570. The aussie was also higher following the Fed, having risen to 0.7274 but trading near 0.7225 around the close of the Asian session.
In other news, the Bank of Japan minutes revealed some worry concerning the slowdown in emerging market economies, which could send ripples back to Japan as export companies are affected; hurting their capital expenditure and employment prospects.
In Australia, Governor Stevens speaking before the parliament, sounded mostly positive about the economy, pointing out decent economic growth and did not give an indication about possible future rate cuts. The Governor again talked down the aussie but it appeared the market has been accustomed to such calls.
Looking ahead, there will not be much market-moving data, leaving traders and investors to fully digest the Fed’s actions or rather inaction. Eurozone current account data for July will attract some interest, while later Canadian inflation will be released. Leading indicators out of the United States could also attract some attention.