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Tags: global | currency markets | fed | investors

Volatility Is Back in Global Currency Markets Before Fed Meets

Volatility Is Back in Global Currency Markets Before Fed Meets
(Dollar Photo Club)

Saturday, 05 September 2015 09:15 AM EDT

With the countdown to the Federal Reserve’s September meeting underway, volatility is returning to global currency markets.

A gauge of price swings extended its longest streak of gains since January this week amid anxieties about the Fed’s path and a renewed focus on China’s slowdown. Foreign-exchange investors pared positions and moved to traditional havens even as U.S. economic reports show continued growth.

“They’re hedging their bets across the board because these are major unknowns that could cause substantial volatility or moves in one direction or another,” Jennifer Vail, head of fixed-income research in Portland, Oregon, at U.S. Bank Wealth Management, said by phone. “There are way too many variables out there.”

Currency volatility rose for a fifth straight week, according to JPMorgan Chase & Co.’s measure of price swings in global foreign exchange.

The yen rose 2.2 percent this week, the most since December, to 118.99 per dollar in New York. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, advanced 5.2 percent to 1,213.86.

Hedge funds and other large speculators pared positions that profit from dollar strength for a third consecutive week in the period through Sept. 1, the longest pessimistic streak since May, data from the Commodity Futures Trading Commission showed.

Fed Bets

Traders are torn on when the Fed will raise interest rates, with Bill Gross of Janus Capital Management seeing an even chance that the Fed could raise or hold rates when it meets Sept. 16-17. Investors scaled back expectations for the U.S.’s first rate increase since 2006 after a selloff in China became a global stock-market rout.

Concern that China’s slowdown will translate into sluggish growth overseas offset Friday’s labor report, which showed better-than-forecast wage growth in the U.S.

The dollar has gained 9.1 percent this year among 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The yen is up 9.8 percent, while the euro is down 0.4 percent.

“There’s uncertainty about U.S. central-bank policy,” said Fabian Eliasson, head of U.S. corporate foreign-exchange sales in New York at Mizuho Financial Group Inc. “Definitely the volatility’s back.”


© Copyright 2022 Bloomberg News. All rights reserved.


StreetTalk
With the countdown to the Federal Reserve's September meeting underway, volatility is returning to global currency markets.A gauge of price swings extended its longest streak of gains since January this week amid anxieties about the Fed's path and a renewed focus on China's...
global, currency markets, fed, investors
346
2015-15-05
Saturday, 05 September 2015 09:15 AM
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