Japanese Yen strengthened due to positive data on Thursday

The Japanese yen stood at 105.08 against the dollar. It was below of 2-1/2-month high of 104.81 reached on Wednesday. The Bank of Japan stated that the country’s economy remains in a severe state but has started to recover. It kept its monetary policy steady on Thursday. 

On the other hand, the Chinese yuan traded at 6.775 per dollar in offshore trade. The Australian dollar skyrocketed due to the strong jobs data. However, the Aussie tumbled down again soon. It last traded lower by 0.53% at $0.72665.

The dollar index rose by approximately 0.32% at 93.493 against six major currencies. It stood at 1.1763 versus the euro. The greenback strengthened on Thursday after the Federal Reserve’s positive assessment of the economic recovery. The agency’s tolerance for higher inflation bolstered Treasury yields as well.

On Thursday, traders bought the dollar after the benchmark 10-year U.S. Treasury yield rose above 0.7% overnight. This is the same reaction the FX market had when Fed Chair Powell introduced a new framework last month. Longer-term yields soared after the announcement – stated Mitsuo Imaizumi, the chief FX strategist at Daiwa Securities. According to him, people think they won’t be able to sell the greenback due to higher interest rates.

Besides the presidential election, the focus will be on the U.S. fiscal support, which Powell said is essential – noted Shinichiro Kadota, the senior strategist at Barclays. Analysts think that if the authorities don’t provide more fiscal stimulus, there may be a slowdown in economic activity.

What did the Fed decide on its last meeting?

At the policy meeting, the Fed pledged to keep rates near zero until at least the end of 2023. It expects economic growth to improve from the downfall they projected in June. The agency also hopes that the labor market reaches maximum employment for that time. 

The U.S. dollar initially tumbled down after the Fed’s statement and weaker-than-expected U.S. retail sales data. Nonetheless, it managed to rebound soon due to Chair Jerome Powell’s comment on the economic outlook.