Currency Analyst since 2010

FOMC minuted: impact on USD

US dollar is holding above 97.00 versus JPY and is trading near a half-year minimum against EUR. The release of the FOMC meeting minutes at 18:00 GMT is the main event of the day.

On the one hand, speculation that the Fed may start tapering QE as early as in September is USD-positive as it lifts up US Treasury yields. Easing itself increases money supply and debases USD. On the other hand, the tapering of monetary stimulus can hurt the stock market and encourage demand for safe-havens like JPY and CHF.

Barclays: “Overall, we expect the minutes to maintain the bifurcated message of recent Fed communications: sounding hawkish on tapering and dovish on rate hikes.”

Mizuho: “Firm yields continue to support the dollar, while bearish stocks and the selloff in emerging markets lead to yen buying. Unless the Fed shows clearer direction in its minutes, I expect this situation to continue for the time being.”

The next meeting of the Federal Open Market Committee will take place on Sept. 17-18. According to 65% of economists surveyed by Bloomberg News Aug. 9-13, the Fed will decide to reduce the bond-buying program at that meeting.

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