Jens Nordvig, managing director of currency research at Nomura
Holdings Inc., closed out a bet the dollar will strengthen against the
yen with a slight profit, and another bet that it would strengthen
against the euro, with a small loss, MarketWatch just reported.
In his opinion, the Fed's latest announcements spurred concerns over the likelihood of a rate-hike in September.
As the latest “dot plot” shows (a picture of policy makers’ rate-hike expectations), just five members of the Fed’s rate-setting committee expect the central bank to raise rates twice this year, down from seven in March.
Nordvig said that the implied pace of rate hikes has dipped to below four rate hikes between the end of 2015 and year-end 2016.
This is why the future direction of rates will completely depend on the strength of U.S. economic data, adding uncertainty in the dollar’s movements in the near term.
Unpredictability is also a problem for the single currency, as the correlation between Greek news and movements in the euro appear to have broken down. Norvig thus said that they will pay close attention to the developments in the U.S. and Greece before initiating fresh exposures.
Japanese officials hardly want the yen to
weaken quickly, but would probably tolerate a more gradual
depreciation, Norvig says.
But the greenback’s muted reaction to Bank of Japan Gov. Haruhiko Kuroda’s comments from Tuesday — when he made remarks to his earlier statement that the yen was unlikely to soften further — suggests the dollar-yen pair will move in a tight range in the short term, MarketWatch says.
