Rupee opens lower by 15 paise against United States dollar

Paterniano Del Favero
Giugno 18, 2017

June 16 (BusinessDesk) - The New Zealand dollar declined against the pound after the Bank of England policy committee kept rates on hold but with a split vote, while it fell against the United States dollar in the wake of yesterday Federal Reserve statement that kept intact plans for another rate hike this year.

The Dollar index, a measure of the value of the United States dollar relative to a basket of foreign currencies, fell 0.10 percent to settle at 97.33. The dollar jumped 1.2% against the Japanese yen to ¥110.93 and the euro fell 0.7% against the dollar to $1.1146.

Even as Fed officials have been proved wrong a number of times on their rate-hike cycle projections over the past years, by reiterating the four-more-hikes mantra by the end of 2018, compared with fewer than two as current market pricing suggests, they've spurred further caution among dollar bears.

The Fed hiked U.S. interest rates on Wednesday as was widely expected. Inflation slowed further than expected, from 2.2% to 1.9% year-on-year and from 0.2% to -0.1% month-on-month.

By 0806 GMT, the index which measures the dollar's broader strength was up 0.2 percent at 97.145. They fell as low as 2.103 percent following the downbeat data, their lowest since November 10. The process could start "relatively soon", Fed Chair Janet Yellen said. Softening commodity prices did little bolster arguments that inflation will pick up the pace, even as the US labor market remains on strong footing - raising the specter that central bank officials made a policy error.

The year-on-year gain in the CPI in May was still larger than the 1.6 percent average annual increase over the past 10 years.

The Central Bank also outlined plans to suck cash out of the financial system by scaling back the bonds on its balance sheet.

A Reuters poll showed Wall Street's top banks see Fed policymakers raising the bank's key overnight borrowing rate one more time by the end of 2017 and three times in 2018. The rest of them said it would make such a move at its December 12-13 meeting.

Treasury yield moves this week come as the Fed elaborated on its plan to normalize monetary policy and shrink its $4.5 trillion balance sheet.

On Friday, the Bank of Japan is widely expected to keep its monetary policy unchanged, and reassure markets it will lag the Fed in tapering its massive stimulus programme, as Japan's inflation remains low despite a strengthening economy.

"With many market participants anxious about a dovish outlook, a surprisingly hawkish one could catch some investors off guard", she said. The dollar index was little changed on Thursday after having slid to as low as 96.323 on Wednesday, having shed almost 6 percent on the year, before bouncing back a tad on the Fed's policy tightening. The New Zealand dollar fell as data showed the economy grew less than expected in the first quarter.

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