FX in Nutshell

The US dollar rise yesterday looks like a one-day wonder, with the euro returning to the $1.38 area, sterling moving through yesterday’s highs and the Swiss franc at new record highs vs the greenback.

The Australian dollar is under-performing following the Reserve Bank of Australia’s decision not to hike rates as had been widely expected. The Bank of Japan also surprised the market by adopting zero-interest rate policy and expanding its balance sheet launching a fund to buy JPY5 trillion of government and corporate paper. This initially lifted the dollar initially about a half a yen to JPY84.00 before hitting offers thought to be leveraged accounts and Japanese exporters.

The doubling of Brazil’s tax on foreign purchases of bonds late yesterday will likely weigh on the Brazilian real, just as news that Korean officials will audit banks’ foreign exchange trading (Oct 19-Nov 5) undermined the Korean won, which has declined 0.7% today, the largest drop in six weeks.
FX in Nutshell FX in Nutshell Reviewed by Marc Chandler on October 05, 2010 Rating: 5
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