Fed Has Positive View of US Economy
The greenback fell slightly on Thursday as the Fed announced that interest rates would continue at historical lows and the purchase of Treasuries would be extended for a month. The Fed also had a more positive view of the US economy raising risk appetite and pressuring the dollar. High yielders such as the Australian and New Zealand dollars rose. The Aussie dollar was up 0.3% to $0.8364 and the Kiwi traded at $0.6736 a rise of 0.3%.
Rising Risk Sentiment
A trader at a European bank said markets saw the Feds statement as dovish and risk positive and dollar negative. In a cautionary statement the unnamed trader said, “But equity markets still don’t look like they have that much steam behind them so people are cautious about piling into risk trades at the moment.” US retail sales data is scheduled for release Thursday and a Reuters survey said that economists expect a 0.7% rise, up from 0.6% in June. US jobs data is expected to show that 545,000 Americans filed for unemployment benefits for the period ending August 8th.
Unexpected Drop in US Retail Sales
An unexpected drop in US retail sales caused the dollar/yen exchange rate to fall. The data shows that US consumers are reluctant to increase spending. The dollar traded at 95.40 in Tokyo a decline of 0.6%. The euro/dollar exchange rate fell 0.7% and the euro traded at $1.4290. Disappointing retail sales data had some forex traders wondering about the dollar’s reaction to the data. Lauren Rosborough of Westpac Banking Corp stated, “You get a number like this and you have people sitting down and scratching their heads. Everyone expected retail sales, in particular the headline number, to be exceptionally good and going into a more risk-positive sentiment.”
Gold Advances
On Wednesday gold advanced for the second day as a decline of the dollar and positive economic news spurred demand for the precious metal and other commodities. Gold rose as much as 0.4% and traded at $951.34 in Asia. For the year as a whole gold is up 7.8%.
