It was a busy week for central banks around the world, with monetary policy meetings in the US, NZ and Japan. This made for a very interesting end to the week for the FX markets as investors digested the deluge of information coming from policymakers.
Market observers say the lingering impact of these game-changing meetings, and possibility of fireworks in this week’s policy meeting in Europe as well, may continue to influence investor sentiment for some time to come as the market reassesses prior assumptions about the trajectory of monetary policy in these countries.
Last week, the market immediately flocked to the US dollar on the back of the Fed’s statement as US Treasury Bond yields rose and stocks fell. Since then the US dollar has gained even more ground against the struggling euro and yen, while the Bangladesh taka was kept stable by the unofficial intervention of Bangladesh Bank for the interest of importers.
When the US dollar hit a three-week high against the Japanese yen and rose against the major currencies, the US dollar traded at ranges between Tk 77.4000 and Tk 77.4200 per unit last week in line with its earlier closings during the last few weeks. The central bank kept the dollar price stable by selling dollar funds to the market players. The dollar’s price came down since last two months as the central bank wants to cap the dollar price around the current thresh hold.
The low dollar price means the lower import cost and the central bank has taken stance to support them as the bulk volume of imported goods and capital machinery are in the pipeline. Bangladesh Bank sold substantial volume of dollar funds to cap the dollar’s price for the interest of importers.
Meanwhile, the pound sterling dropped to Tk 123.9726 per unit on Thursday, from Tk 124.1960 per unit last week. The euro lost to Tk 97.8434 from Tk 97.8772 per unit, dealers of different commercial banks said.
The Australian dollar, meanwhile, gained strength further and traded higher at Tk 68.0909 last week from Tk 67.9737, the previous week, when the Japanese yen lost points to Tk 0.7111 from Tk 0.7243 per unit, dealers said.
The greenback hit a three-week high of 109.08 yen on Thursday, up from 108.90 yen in New York and 108.12 yen in Tokyo earlier Wednesday, while it rose against majors as a slightly bullish turn by the US Federal Reserve fuelled hopes for an early rise in US interest rates, dealers said.
The euro fell to $1.2594 from $1.2634 in US trade and Wednesday’s $1.2737 in Asia. The single currency was at 137.39 yen compared with 137.60 yen in New York. The Australian dollar tumbled to 87.65 US cents from 88.66 cents while the Chinese yuan firmed to 17.81 yen from 17.66 yen, dealers said.
Last week, according to Forex.com analyses, the pair EUR/USD inched modestly higher early last week before turning sharply lower after the Fed’s less-dovish-than-anticipated statement on Wednesday. More broadly, the pair remains at the bottom of its recent 6-week range from support at 1.2500 up to resistance at 1.2850.
Like its mainland rival, GBP/USD edged higher early in the week before reversing sharply lower in the wake of Wednesday’s FOMC statement and decision. The pair peeked briefly above the bearish trend line off the July high near at 1.7200, but was thoroughly rejected back lower by the bulls.
The USD/JPY exploded higher last week, reaching a 7-year high after the BOJ surprisingly expanded its QE program. As we go to press, the pair is trading above 112.00, and the pair has clear skies until at least 1.1300 or 1.1400.
The AUD/USD is the currency pair in play due to a number of high-impact economic reports out of Australia and the US this week. The pair tried to break above key previous resistance at 0.8900 midway through last week, but was summarily rejected back lower.
Investors are now waiting for a string of data later in the day including US third-quarter growth, eurozone October economic sentiment and business climate report, and preliminary German October consumer inflation. The Bank of Japan holds a policy meeting on Friday.