Fed policy decision, with the Ukraine war and China's surging COVID-19 cases

•  The dollar traded near a five-year high against the yen today in the Asian trading session
• Australia's currency also came under pressure as top trade destination China saw new COVID cases
• Britain’s unemployment rate fell more than expected to 3.9% in the three months to January

Forex market

The dollar traded near a five-year high against the yen today as investors awaited a Federal Reserve policy decision, with the Ukraine war and China's surging COVID-19 cases as the backdrop. 

Treasury yields surged ahead of the Federal Open Market Committee decision, buoying the dollar against its Japanese peer, with traders fully priced for a first interest rate hike in three years, and giving 13% odds of a half-percentage point increase.

Economic Calendar

The dollar was also hovering near its highest level this month to the Aussie after commodity prices pulled back from multi-year peaks as markets stayed optimistic that Russia-Ukraine talks could lead to an end to hostilities. Australia's currency also came under pressure as top trade destination China saw new COVID cases more than doubling on Tuesday to a two-year high, raising concerns about the rising economic costs of its zero-tolerance policies to contain the disease. 

Meanwhile, the euro continued its recovery from a plunge to a nearly 22-month low earlier this month. That helped keep the dollar index stuck around 99.0, from as high as 99.415 at the start of last week. Whether it's forlorn or otherwise, there does seem to be some enduring optimism coming from the fact that Russia and Ukraine are still talking.

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For the greenback, the bigger question will be that there is a lot of historical evidence that the dollar peaks as soon as the Fed commences the tightening cycle, so there's a lot of interest in whether what the Fed does turns out to be something of a watershed in terms of a peak. The dollar index last stood at 98.880, down slightly from Tuesday. The euro ticked 0.14% higher to $1.09695, from a trough of $1.08060 on March 7. The Aussie edged 0.08% higher to $0.72015, after dipping to $0.71650 in the previous session for the first time since Feb. 28.

Euro-EUR

The single currency traded higher as the eurozone economy is still set for robust growth this year, even if the war in Ukraine is going to be a drag via high commodity prices, European Central Bank President Christine Lagarde said yesterday. Lagarde said a speech that largely repeated the bank's policy stance. Overall, the EUR/USD traded with a low of 1.0884 and a high of 1.0665 before closing the day around 1.0934 in the New York session.

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Yen-JPY

The Japanese Yen continued trading at its weakest levels to the dollar in five years as the greenback gained 0.1% to 118.335 yen. Early in the day, major currency pairs had been relatively steady as markets waited to hear on Wednesday the tone of U.S. Federal Reserve comments on interest rate policies in coming months. Overall, the USD/JPY traded with a low of 114.63 and a high of 115.53 before closing the day around 114.83 in the U.S session.

British Pound-GBP

The British Pound rose against the dollar yesterday as strong jobs data supported the prospect of a Bank of England rate hike, but fell against the euro which was boosted by optimism around talks between Russia and Ukraine. Britain’s unemployment rate fell more than expected to 3.9% in the three months to January. Overall, the GBP/USD traded with a low of 1.3200 and a high of 1.3353 before closing the day at 1.3238 in the New York session.

Canadian Dollar-CAD

The Canadian Dollar was little changed against its U.S counterpart yesterday, recovering from its weakest level in nearly one week, as investors weighed further pull-back in oil prices and domestic data showed an increase in housing starts. The price of oil, one of Canada’s major exports, tumbled to its lowest levels in almost three weeks. Overall, USD/CAD traded with a low of 1.2667 and a high of 1.2789 before closing the day at 1.2735 in the New York session.

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Australian Dollar-AUD

The Australian Dollar fell as investors fear a major Coronavirus outbreak is about to hit the world's most populous country even as authorities continue to insist on a zero-covid policy. New Covid cases in China more than doubled from a day earlier to a two-year high at 3,507 as a virus outbreak expanded rapidly, particularly in the northeast of the country. Overall, AUD/USD traded with a low of 0.7138 and a high of 0.7235 before closing the day at 0.7231 in the New York session.

Euro-Yen EUR/JPY

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The Relative Strength Index is above 40 and lies below the neutral zone. In general, the pair has lost 1.70%.

Sterling-Yen GBP/JPY

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 42 reading and lies below the neutral zone. On the whole, the pair has lost 1.35%.

Aussie-Yen AUD/JPY

Currently, the cross is trading above 14, 50 and below 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 54 reading and lies above the neutral region. In general, the pair has gained 0.06%.

Euro-Sterling EUR/GBP

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 46 and lies below the neutral region. Overall, the pair has lost 0.35%.

Sterling-Swiss GBP/CHF

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 40 and lies below the neutral region. In general, the pair has lost 0.86%.

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