Aussie, yen swing on Thursday before ECB and as China moves to aid market liquidity
On Thursday the Japanese yen and Australian dollar were volatile, ahead of a European Central Bank meeting expected to ease policy further and as China moved to aid liquidity in the market and investors took positions.
AUD/USD traded at 0.8066, down 0.25%, while USD/JPY traded at 118.26, up 0.25%. EUR/USD changed hands at 1.1602, down 0.06%.
Late Wednesday China's central bank said that it had rolled over a 269.50 billion yuan ($44 billion) medium-term lending facility for banks and provided an additional 50 billion yuan in loans to commercial and rural lenders in a 7-day offering with the rate set at 3.85%, from 4.1% previously.
Earlier this week Interbank money rates rose, as liquidity remained tight after tax payments and on concerns of more capital outflows. The People's Bank of China announced it would adjust as economic conditions require, but pledged to keep liquidity stable.
In Australia, MI inflation expectations showed a weighted median view of 2.4%, compared to 2.6% in November, hinting that like dollar bloc nation Canada the global commodity slump is diminishing inflation concerns, while HIA new home sales for November rose 2.2%, compared to the previous month gain of 3.0%.
On Wednesday, the Bank of Japan maintained the size of its stimulus program and reiterated its pledge to increase base money at an annual pace of ¥80 trillion through buying government bonds and risk assets. The central bank also cut its core inflation forecast 1% from 1.7% three months ago.
The greenback regained ground overnight against the other major currencies, inching its way back toward recent 12-year highs as investors turned their attention to the European Central Bank's upcoming policy meeting on Thursday.
Earlier Wednesday, the U.S. Commerce Department announced that the number of building permits issued last month decreased by 1.9% to 1.032 million units from November’s total of 1.052 million. Economists expected building permits to rise by 1.3% to 1.055 million units in December.
The report also showed that U.S. housing starts rose by 4.4% last month to hit 1.089 million units from November’s total of 1.043 million units, compared to expectations for a reading of 1.040 million.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, traded up 0.12% at 93.12.
The loonie weakened broadly after the Bank of Canada unexpectedly lowered its overnight target rate to 0.75% from 1.0% previously, saying that the rout in oil prices over the past six months would be negative for growth and underlying inflation in Canada.
The BoC said it now expects economic growth to slow to about 1.5% and the output gap to widen in the first half of 2015. Inflation is also expected to fall below the bank’s target during the coming year, before moving higher again in 2016.
