The Aussie dollar falling below 64 US cents may have seemed concerning, but Stephen Koukoulas explains why things aren’t as bad as they seem.
The U.S. dollar resumed its seemingly relentless march higher in early European trading Thursday, while sterling slumped as the relief rally attached to the Bank of England’s intervention into the bond market dissipated. The Bank of England announced an emergency bond-buying on Wednesday, attempting to shore up the gilt market which had slumped, along with the pound, after the new U.K. government announced substantial tax cuts, likely funding by hefty borrowing.
The U.S. dollar edged higher in early European trading Friday, remaining in demand after the Federal Reserve’s hawkish stance, while the yen was buoyant after the intervention of Japanese authorities. USD/JPY fell 0.1% to 142.28, continuing to fall after a drop of more than 1% on Thursday after Japanese authorities intervened in markets to support the yen for the first time since 1998. The intervention followed the decision of the Bank of Japan to maintain its ultra-easy monetary policy.