On Tuesday in the forex markets, the pound fought a nearly six-month low versus the dollar. The constant worries over Brexit blocked the balanced on the euro.
As the interest rate outlook of the Federal Reserve remains in keeping the greenback on the resistance, the dollar struggled for traction versus the yen.
The pound decreased $1.2515 after a succeeding overnight loss of 0.5%. Meanwhile, sterling glided $1.2439 its lowest since early January.
Meanwhile, the outlook of Eurosceptic Boris Johnson winning the Conservative party leadership contest. Becoming the next British prime minister increased the worries of investors.
Furthermore, Sterling received some pressure linked to the possible winning of Boris Johnson.
The pound, being at its lowest, was due to the poor economic data and signals from the Bank of England. It might cut interest rates instead of raising them as expected.
A senior currency strategist at Daiwa Securities, Yukio Ishizuki said, “The euro has been weighed by the long-struggling pound, which in turn is likely to suffer from Brexit-related woes until the Conservative party leader is decided next week.”
The dollar improved to 107.960 yen.
Last week, the U.S. currency gained 108.990 yen and is currently on a six-week high.
This month, it plunged when uncertainties of the world’s largest economy were underscored by the Federal Reserve Chairman Jerome Powell after proposing a rate cut.
Forex Markets: Further Rate Cut Discussions
On Friday, after Chicago Fed President Charles Evans said, “a couple” referring to rate cuts are desired to lift inflation. The dollar lost momentum to advance versus the yen towards the end of last week.
A chief market economist at Mizuho Bank, Daisuke Karakama stated, “Dollar/yen have strengthened its correlation with U.S. yields since mid-May, rather than move in step with equity prices.”
In addition, he also said, “Prior expectations that higher equities would weaken the yen held by some market participants have been dashed completely.”
Serving as an advantage to equities was the outlook of the Fed easing monetary policy, with Wall Street over the past week advancing its shares to record highs.
The yen in the forex markets is often depreciating when stronger investor risk-appetite has enhanced equities.
Meanwhile, the face of tumbling U.S. yields has declined the correlation. The 10-year yield appears to be diminishing to a nearly three-year slump this month amid a pending easing of the Fed.
After edging up 0.13% the previous day. The dollar index against a basket of six major currencies was nearly flat at 96.924.
Moreover, the Australian dollar, after increasing about 0.3% the previous day, almost did not move to 0.7037. The Chinese economic data lifted it, even if neither matched nor beat market forecasts.
Australia’s largest trading partner is subtle to the economic prosperities of China.
Meanwhile, according to People’s Bank of China Deputy Governor Pan Gongsheng, the Chinese yuan is given a new chance to enhance its global status amid rising trade struggles.