18 Dec 2014
Nikkei up, CNY down, as USD firms on Fed’s statement – TradeTheNews
FXStreet (Barcelona) - The TradeTheNews Team notes that Nikkei225 leads the regional rally after Fed’s policy statement halted the downward decline of USD/JPY, further observing that the firming USD also affected the CNY which fell to lowest levels since late July aided by Chinese Government’s stance to allow a weaker Yuan.
Key Quotes
“Nikkei225 is leading the regional rally as remarks from Fed Chair Yellen on policy intentions in 2015 have finally helped arrest the downward reversal in USD/JPY. FOMC replaced the "considerable time" component of its statement with the pledge to be "patient in beginning to normalize the stance of monetary policy" but also acknowledged further improvement in labor market conditions.”
“In terms of economic projections, the Fed raised 2014 outlook and lowered unemployment estimates for the next 3 years, but also lowered median fed funds rate forecasts (dots) for 2015, 2016, and 2017 by 20bps, 37.5bps, and 7.5bps respectively.”
“The most concrete market reaction came during Yellen's testimony when she said that "patient" means the Fed will not begin normalization process 'at least for the next couple of meetings', and in the Q/A Yellen affirmed that a "couple" means "two".“
“Traders took that remark to mean that the liftoff in rates could take place as early as in April - the 3rd in the sequence of upcoming FOMC meetings - sending the dollar sharply higher. USD/JPY hit a high of 119 in early Asia dealing - up 200pips from immediate post-FOMC lows - while EUR/USD and AUD/USD caved 150pips and 120pips respectively to 1.2320 and 0.8110.”
“Chinese Yuan was also a notable mover against the dollar, as offshore trade moved above 6.21 level - the weakest Yuan level since late July. Coupled with firmer dollar, pressure on CNY was aided by reports the govt will be open to a more flexible fx rate and more willing to allow the currency to depreciate.”
Key Quotes
“Nikkei225 is leading the regional rally as remarks from Fed Chair Yellen on policy intentions in 2015 have finally helped arrest the downward reversal in USD/JPY. FOMC replaced the "considerable time" component of its statement with the pledge to be "patient in beginning to normalize the stance of monetary policy" but also acknowledged further improvement in labor market conditions.”
“In terms of economic projections, the Fed raised 2014 outlook and lowered unemployment estimates for the next 3 years, but also lowered median fed funds rate forecasts (dots) for 2015, 2016, and 2017 by 20bps, 37.5bps, and 7.5bps respectively.”
“The most concrete market reaction came during Yellen's testimony when she said that "patient" means the Fed will not begin normalization process 'at least for the next couple of meetings', and in the Q/A Yellen affirmed that a "couple" means "two".“
“Traders took that remark to mean that the liftoff in rates could take place as early as in April - the 3rd in the sequence of upcoming FOMC meetings - sending the dollar sharply higher. USD/JPY hit a high of 119 in early Asia dealing - up 200pips from immediate post-FOMC lows - while EUR/USD and AUD/USD caved 150pips and 120pips respectively to 1.2320 and 0.8110.”
“Chinese Yuan was also a notable mover against the dollar, as offshore trade moved above 6.21 level - the weakest Yuan level since late July. Coupled with firmer dollar, pressure on CNY was aided by reports the govt will be open to a more flexible fx rate and more willing to allow the currency to depreciate.”