Dollar Gains In Asia After Fed Details Policy Views

The dollar rose to a two-month high against the yen and extended its gains against the euro on Thursday after a hawkish-sounding Federal Reserve heightened expectations for an interest rate hike in December.

The euro shed 0.15 percent to 1.1877 after dropping 0.8 percent the previous day, when it snapped a four-session winning run. The dollar was 0.4 percent higher at 112.640 yen, its highest since July 18. Still, the greenback's gains against its Japanese counterpart were seen to be relatively limited.

While the Fed's latest policy stance was viewed as hawkish for the most part, the central bank did lower again its estimated long-term "neutral" interest rate from 3.0 percent to 2.75 percent, reflecting concerns about overall economic vitality.

The dollar index against a basket of six major currencies was up 0.1 percent at 92.623 and near a two-week high of 92.697 set overnight, when it added 0.8 percent. The rupee fell to 2-month low of 64.43 per dollar on Wednesday - its lowest intraday value against the greenback since July 26 - before recovering to close 6 paise higher at 64.26. 

The rupee had closed at 64.32 against the US dollar on Tuesday on sustained demand for the American currency from importers amid a higher greenback overseas. Rupee remained volatile, trading in the 64.24-64.43 zone against the US dollar. Further, we expect the pair to trade in the range of 64.25-64.50 for the day.

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JPYINR - Ways2Capital

JPYINR trading range for the day is 57.61-58.01. JPY remained supported as investors awaited the outcome of Fed’s meeting at which it was expected to announce plans to trim its $4.2 trillion in bond holdings.

The Bank of Japan will deliver its own policy verdict, and is widely expected to maintain the status quo as inflation remains tepid. Japan posted a merchandise trade surplus of 113.642 billion yen in August, the Ministry of Finance said.

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GBPINR - Ways2Capital

GBPINR trading range for the day is 86.53-87.91. GBP remained supported on a report that the UK foreign minister Boris Johnson could resign before the weekend.

GBP Confidence among U.K. businesses is at the lowest level since Brexit. Central banks around the world need to watch for the risk that financial firms are caught out by higher interest rates and the scaling back of bond-buying programs.

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EURINR Trading Range For The Day Is 77.05-77.54

EURINR trading range for the day is 77.05-77.54. Euro remained supported as the dollar slipped lower as investors remained cautious ahead of the Federal Reserve's policy statement and amid fresh geopolitical concerns.

ECB policymakers disagree on whether to set a definitive end-date for their money-printing programme when they meet in October. Germany's producer prices increased at the fastest pace in three months in August, Destatis reported.

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USDINR - Ways2Capital

USDINR trading range for the day is 64.19-64.58. Rupee recovered from day’s low as investors remain focused on the Federal Open Market Committee monetary policy meeting outcome.

The Indian government is discussing steps to revive the economy, Finance Minister Arun Jaitley said. India's current account deficit increased sharply to 2.4% of GDP in first quarter, from 0.1% a year ago, says RBI.

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Indian Rupee Slips 24 Paise In Opening Trade

The Indian rupee slipped in the early trade on Thursday. It has opened lower by 24 paise at 64.50 per dollar versus 64.26 Wednesday.

Mohan Shenoi of Kotak Mahindra Bank said, "The FOMC kept Fed funds rate unchanged but announced balance sheet normalisation from October. Probability of a December rate hike has now increased significantly."

Consequently, the dollar index spiked sharply and US 10-yar treasury yield firmed up. We expect the USD-INR pair to trade in a range of 64.20- 64.50 for the day. Higher crude prices and higher US treasury yields are likely to generate negative sentiment in the local bond market. Fiscal slippage worries could re-surface with a possible fiscal stimulus."

"The 10-year benchmark bond yield is expected to trade in a range of 6.58-6.61 percent for the day," he said.The dollar rose to a two-month high against the yen and extended its gains against the euro after a hawkish Federal Reserve heightened expectations for an interest rate hike in December.

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Dollar Ticks Down As Traders Await Possible Move On FED Bond Purchases

The dollar weakened against a basket of currencies on Tuesday in advance of a Federal Reserve meeting where policymakers are expected to decide on the reduction of the central bank's $4.2 trillion worth of bond holdings.

The Fed's possible move to further roll back stimulus has not stemmed the greenback's weakness this year as other major central banks are considering steps to either slow their bond purchases or raise interest rates.

The index that tracks the dollar against six currencies was down 0.3 percent at 91.780, which was not far from the over 2-1/2 year low of 91.011 set on Sept. 8. U.S. currency was steady on the day against its Japanese counterpart at 111.56 yen, moving back toward an eight-week peak of 111.88 yen scaled overnight.

The euro was also steady on the day, at 1.1990 and GBPUSD with its choppy moves closed flat forming doji candle formation on daily charts. The local unit opened at 64.1950 against previous close of 64.08. The unit succumbed to the dollar bulls thereby closing at 64.3350. We expect the pair to trade in the range of 64.10.-64.35 for the day.

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