On Wednesday, the dollar regained some ground and rose against most of its main rivals.
The Federal Open Market Committee believes that novel Coronavirus could continue to hamper economic growth and pose a potential threat to the financial system, according to the Fed minutes. The Fed reiterated that the economic downturn triggered by the outbreak faces a highly uncertain path and that additional fiscal stimulus is needed to support the economy.
The dollar rose, yields rose and spot gold extended losses to more than 3 per cent as the minutes also showed policymakers did not support a cap on US Treasury yields.
Most of those discussing the option agreed that, in the current environment, a yield cap and a target would probably offer only modest benefits.
In late U.S. trading, the dollar index.DXY closed up 0.77 percent at 93.04, having hit a low of 92.15 and a high of 93.07.
Valeria Bednarik, chief economist at FXStreet, wrote that the Fed’s minutes were very similar to those from its last meeting, but added some encouraging elements as policymakers said economic activity and employment had picked up in recent months but were still well below pre-outbreak levels. The minutes spurred the dollar to rise again against major currencies.
Edward Moya, senior market analyst at brokerage OANDA, said, “One of the concerns in the market was that the Fed might take yield curve control measures, which would be a strong catalyst for continued dollar weakness, but they said they were not considering it at this time.” Limiting yields on U.S. treasuries could make them less attractive, putting pressure on the dollar.
Adam Button, an analyst at Forexlive.com, said the DOLLAR index DXY extended gains in the minutes after the meeting, with some pointing to comments on yield curve control (YCC), but that was what policy makers had been saying, so it should not be a surprise.
Gold prices fell sharply on Wednesday as the dollar halted a five-session losing streak and the Federal Open Market Committee expressed concern about the future of the economy at its last meeting.
Spot gold closed at $1928.71 an ounce, down $72.73, or 3.63 percent. On the day, spot gold hit as high as $2006.30 an ounce and as low as $1,924.35, a move of more than $80.
“The expectation of more fed action was the catalyst for the sell-off,” said Jeffrey Sica, an analyst. The Fed has shown no sign that it will create the liquidity that gold investors want.
Bank of America’s monthly fund managers survey showed a net 31 per cent of respondents thought gold was overvalued, up from 0 per cent a month ago. The survey also found that being long gold was the second most crowded trade in financial markets (after being long U.S. technology stocks).
In other news, the U.S. State Department on Wednesday suspended an extradition treaty with Hong Kong, the latest sign that U.S.-China relations have soured in the weeks since China imposed a national security law on the territory. The treaty is one of three bilateral agreements between the United States and Hong Kong that the Trump administration has suspended. Morgan Ortagus, a US State Department spokesman, said: “These agreements cover the transfer of fugitives, the transfer of sentenced persons and reciprocal tax exemptions for income from international ship operations.” The State Department said the move was made in accordance with President Donald Trump’s July 14 executive order. The order said Hong Kong “no longer has sufficient autonomy to obtain differential treatment in its relations with the People’s Republic of China” because of the territory’s security laws.
U.S. President Donald Trump on Tuesday again stressed that mail-in ballots could lead to electoral fraud, saying mass mail-in ballots could lead to “another go” in the U.S. election. Mr Trump has repeatedly said that mailing ballots would encourage electoral fraud, though he has yet to produce evidence.
According to media reports, short video social networking platform TikTok USA has launched a new website to refute the US government’s slurs. TikTok American company staff have reportedly ready to TikTok trading ban filed a lawsuit, the lawyer, Blackstone group well-known human rights lawyer law goodwin said, will be later this week to the federal court litigation, belongs to administrative charges of trump ban unauthorized, will harm the TikTok American company staff’s constitutional rights, including the right to pay. Attorneys say they are considering a lawsuit in the Southern District of New York, northern California, or Washington, D.C.
Trend analysis of major currencies:
Euro: The euro fell against the dollar for the first time in seven days, closing down 0.75% at $1.1838. Technically, the pivot point of the currency is at 1.1873, the initial resistance to the upward movement of the exchange rate is at 1.1916, further resistance is at 1.1996, and the key resistance is at 1.2039. Initial support for the lower exchange rate is at 1.1793, further support at 1.1750, and more critical support at 1.1670.
Sterling: It fell against the dollar for the first time in five days, closing down 1.3093, or 1.08 per cent. Technically, the pivot point of the currency is at 1.3149, the initial resistance to its upward movement is at 1.3208, the further resistance is at 1.3326, and the key resistance is at 1.3385. The initial support is at 1.3031, further support is at 1.2972, and more critical support is at 1.2854.
Yen: USDJPY gained for the first time in four days, closing at 106.11, up 0.65%. Technically, the pivot point of the currency is at 105.78, the initial resistance to its upward movement is at 106.46, further resistance is at 106.83, and the key resistance is at 107.51. Initial support for the lower exchange rate is at 105.41, further support is at 104.72, and more critical support is at 104.35.