Yen, US Dollar May Fall in Pre-Positioning for FOMC Rate Decision

TALKING POINTS – NEW ZEALAND DOLLAR, YEN, US DOLLAR, FED, STOCKS

• NZ Dollar bounces from two-week low following business confidence data
• Yen may trim APAC session gains as S&P 500 futures hint at risk-on bias
• US Dollar may fall as markets position for a dovish FOMC rate decision

The New Zealand Dollar outperformed in Asia Pacific trade, enjoying support from nominally upbeat business confidence data. The figures seemed to trigger a correction from the two-week low where the currency has been lingering after last Friday’s plunge. The Japanese Yen dutifully rose as regional stocks declined, boosting the perennially anti-risk currency.

Looking ahead, a quiet offering on the economic data front in Europe and the US seems likely to keep sentiment trends at the forefront. Bellwether S&P 500 futures are mounting a spirited recovery ahead of the opening bell on Wall Street, hinting that a rebound may be ahead after yesterday’s blood-letting. That seems reasonable as traders neutralize exposure ahead of the upcoming FOMC rate decision.

The Yen may give back some of its latest advance against this backdrop while sentiment-geared commodity bloc currencies find support. The US Dollar may find itself on the defensive as investors position for a dovish turn in Fed rhetoric. Indeed, the priced-in 2019 rate hike path has flattened in anticipation, with even one increase next year now seen as uncertain. Such skepticism seems likely to be disappointed however.

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

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