Japan’s yen bears brunt of market rethink on Fed

SINGAPORE, Aug 13 — The Japanese yen fell the most against a recovering US dollar yesterday, as a two-day rally in equities conceded to market expectations that the Fed would have to do a lot more to contain inflation.

The latest was San Francisco Fed President Mary Daly, who said on Thursday that a 50 basis point interest rate hike in September “makes sense”, given recent economic data, including inflation figures, but that she is open to a bigger rate hike if data warrants.The dollar index rose 0.1 per cent to 105.21, with the euro EUR=down to US$1.0311.

“The market will come to a realization that the FOMC has a lot more work to do and they will have to increase the funds rate to as high as 4 per cent at the end of this year,” said Carol Kong, a Sydney-based senior associate for currency strategy and international economics at Commonwealth Bank of Australia.

While that data caused a relief rally in markets fearing the Fed’s super-charged tightening path, it was short-lived. Despite its recent bounce off mid-June lows, the tech-heavy Nasdaq is down about 18 per cent so far this year.

Source: News Formal (newsformal.com)

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