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Talking Points:

  • New Zealand Dollar back on offense as markets fade the Fed
  • US Dollar vulnerable amid a lull in top-tier scheduled event risk
  • Yen may not capitalize on anti-USD flows as risk appetite firms

The New Zealand Dollar outperformed in otherwise quiet Asia Pacific trade, reclaiming most of its post-FOMC advance having retraced yesterday. The US Dollar was back on the defensive after a feeble uptick Thursday, with traders seemingly content to resume fading the Fed. Officialstopped priced-in betswith a call for three rate hikes next year while upgrading growth and employmentforecasts, but markets didn’t bite.

The economic calendar offers little by way of market-moving event through the end of the trading week. That might leave major currencies on autopilot. The markets’ reaction to the Fed announcement was clearly this week’s most trend-defining development and they may default to those patterns absent another catalyst. That bodes well for commodity bloc FX at the expense of the greenback.

The Japanese Yen is often-times another beneficiary of a dovish shift in Fed policy bets. The go-to funding unit is no less sensitive to shifts in yield-seeking capital flows than the usual objects of carry trade demand, like the Aussie and Kiwi Dollars. It may struggle this time around however as S&P 500 futures point to firming sentiment, which usually corresponds to losses for the anti-risk currency.

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Asia Session

NZ Dollar Back on the Offensive as Markets Fade the Fed

European Session

NZ Dollar Back on the Offensive as Markets Fade the Fed

** All times listed in GMT. See the full DailyFX economic calendar here.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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