Monday presented market traders with volatility as turmoil in the emerging markets continued, causing European and Asian equities markets to sustain major declines, with the Nikkei posting serious losses. The Yen rallied as the developing nations’ stocks recouped.
Yen Posts Losses Versus Greenback
The U.S. Dollar advanced against the Yen subsequent to the release of solid data issued by the Bank of Japan which showed that the corporate services price index went up in the month of December, by 1.3 percent, rather than the anticipated 1.1 percent. The greenback was supported by releases indicating that new home sales posted at a seasonal adjusted 414,000, even though it missed forecasts for a reading of 475,000. The figures prompted the greenback’s decline. However, money market traders remained hawkish on the U.S. currency as they anticipate the decision by the Federal Reserve, due out today. Some economists believe that the metrics were positive since they still posted above December’s which came in at 296,000, but some analysts are concerned as they dipped to three-month lows. For many, this is a source of concern since the announcement followed the disappointing release on existing home sales published last week. The indicator denoted that this was the fourth consecutive drop in new homes sales, but the report revealed a hike in prices, a factor that capped the Dollar’s losses.
Euro Off To Good Start
The 18-nation currency got off to a strong start on Monday continuing on its bullish trend days after the Euro region issued positive PMI numbers. The greenback bounced back steadying versus the Euro as Germany’s IFO Research Institute announced that the business climate index climbed from 109.5 to 110.6 this month. Other positive releases out of the Euro-zone, confirmed that the current account sustained a surplus of 23.5 billion Euros in December, after posting one of 21.8 billion in the previous month. While the last string of reports were disappointing, the Euro gathered momentum ever since France announced improvements in the services and manufacturing sectors, though both remain under 50, denoting contraction. Also, the E.U.’s PMIs surpassed prior forecasts.
And this has helped the Euro’s rally.
Aussie Recovers Ahead of FOMC
Australia’s Dollar rebounded as the Federal Reserve began its two day meeting. This is the last time the FOMC convenes before Janet Yellen takes over as chairperson for the central bank. Online Forex traders are anticipating that the Fed will announce another $10 billion reduction in stimulus. The Aussie dipped as the volatility in emerging market equities prompted speculators to take refuge in safe havens.