The US dollar has managed to hold onto gains after a basket of peers on Tuesday came forward to explain the situation. The Federal Reserve has given a very upbeat assessment of the biggest economy in the world and they have also stayed on course as interest rates rise. The dollar was already well-bid when it comes to concerns about more escalations. This is because of the Sino-US trade disputes and the fact that the US Treasury is higher than normal. So when they ended their two-day meeting, the FED chose to keep interest rates relatively unchanged and this was to be expected. The US economic growth has been going up and the job market is staying strong as well. The FED have delivered some hawkish comments on the statement and they have continually emphasised the US economy. This comes as no surprise but the tone from this meeting was a little stronger when you compare it to the last meeting that they had. The dollar index is measured by the greenback and this is against a basket of six currencies. This was a shade higher when you compare it to the previous years and the global finance markets have remained focused on the trade war.
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The safety bid from the dollar has also been bolstered by the US yields as well. The main concern here is that the dollar is under some serious pressure form the yen and it has dropped as well. Japan have also come out to say that they are going to keep their rates low for as long as possible and they also want to make it easier for yields to move around as well. The problem is that the yen has weakened and this is a result of the BOJ’s new guidance. It’s not that anything has changed however, and this is because nobody really believed that the BOJ quantitative easing would come to an end this year or even the next. The view at the moment is that the yen is going to weaken as a result of the BOJs fading presence.
The central bank for Japan has stated that they are going to add forward guidance for communication and that this is going to be present in all of their regular policy statements. This has not happened in the past, but the euro has remained soft against the dollar. The British pound is a little lower and the markets are really expecting interest rates to be raised for even longer periods of time.