USD: FOMC negativity fading away – MUFG

FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the initial negative FOMC reaction for the USD has turned out to be short-lived and the greenback has strengthened modestly in the Asian trading session with the dollar index having fully retraced its initial decline following last week’s FOMC meeting.

Key Quotes

“US dollar weakness proved even more modest and short-lived than we had expected. Our view was that the outcome from the FOMC meeting was more neutral for the US dollar as the market was already discounting an even more dovish outlook for Fed policy than presented at last week’s FOMC meeting.”

“The dovish risk for the US dollar in the near-term will be if the Fed delays tightening monetary policy until next year. However, it will likely require a significant deterioration in the outlook for economic growth overseas which would also increase the relative attractiveness of the US dollar.”

“Dovish comments from Fed Chair Yellen have already reinforced investor concerns over slowing economic growth overseas. Asian currencies have come back under downward pressure in the Asian trading session after rebounding modestly heading into and initially following the FOMC meeting.”