Dollar Lower After FOMC, New Zealand Dollar Tumbles on Weak GDP

 
   By Hiroyuki Kachi 
 

        The dollar extended its losses against the yen and the euro in Asia trade Thursday after a lack of clear commitment by the Federal Reserve to raise interest rates in September indicated continued caution at the U.S. central bank.
        The New Zealand dollar meanwhile tumbled to a fresh five-year-low against the dollar after weaker-than-expected growth figures for the economy.
        Around 0550 GMT, the greenback was at Y122.92, a one-week low, compared with Y123.43 late Wednesday in New York.
        Amid a lull in headlines on the Greek bailout impasse, the euro gained some ground against the softer dollar, rising to $1.1366 from $1.1337, while declining against the yen to Y139.66 from Y139.91.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was down 0.15% at 85.68.
        As hopes mounted overnight that the Fed would give a clearer sign that it would raise short-term rates in September, the U.S. currency climbed to as high as 124.46 overnight ahead of the outcome of the FOMC. But the dollar gave back all those gains to return to its level earlier Wednesday as investors interpreted the lack of a signal as a dovish stance. The Fed also lowered its interest projections over the coming years, another indication of cautious views.
        During Asia session, the dollar resumed its falls helping prompt weakness in stocks that fed back into further weakness for the greenback as risk aversion strengthened. The Nikkei Stock Average was down 1.0% in the afternoon session.
        "The market is increasingly become directionless," said Shusuke Yamada, chief FX strategist at Merrill Lynch Japan, adding that Japanese corporate investors are continuing to buy the dollar on dips. The divergence in U.S.-Japan monetary policy is also keeping downside support solid, he said.
        At the same time, the dollar's upside is also capped by the Fed's continued caution over raising rates and possible jaw boning from U.S. and Japanese authorities, said Mr. Yamada.
        The euro edged up against the weakening dollar amid a lack of developments in the Greek bailout stalemate.
        Eurozone finance ministers are meeting Thursday in Luxembourg, but Greek Finance Minister Yanis Varoufakis has said he won't bring any new proposals. Greece's central bank warned Wednesday that failure to clinch a deal with international creditors on desperately needed funding could tip Greece toward catastrophe.
        Putting aside the potential for Greece-related headlines causing market turbulence, market participants said they were focusing on U.S. economic indicators as the main factor likely to move the markets later in the day.
        "There is no choice but to keep checking each item of (U.S.) economic data and gauging the (rate hike) possibilities," given that the FOMC overnight gave no clear signal for a Fed rate increase in September, said Gaitame.Com Research Institute analyst Kumiko Ishikawa in a morning note.
        Among other currency pairs, the New Zealand dollar tumbled to $0.6880, a fresh low since July 2010, and Y84.79, a four-month low against the yen, respectively, from $0.6988 and Y86.25 after weaker-than-expected growth in New Zealand's economy.
        The nation's gross domestic product rose 0.2% on quarter in the three months to March 31 and rose 2.6% on year. Both figures were below median expectations in a Wall Street Journal poll of 14 economists, who had forecast growth of 0.6% on the quarter and 3.1% on the year.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        June 18, 2015 01:56 ET (05:56 GMT)

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