Thu 11th Nov: Fed tightening rescues the dollar

The US Federal bank tightened the funds rate by another quarter percentage point in one of the most anticipated moves in the recent times and continued with its phrase of raising the interest rates at a “measured” pace.
The greenback salvaged some pride and recovered to the 1.2880 levels from its all time lows of 1.3006 vis-à-vis the euro in the New York trade. A 4% decline in the September US trade deficit to $51.6 billion from the market expected figure of $53.5 billion, courtesy strong exports and falling imports, also assisted the dollar’s comeback.
Better economic fundamentals and a barrage of comments from ECB officials and European politicians regarding euro’s relentless rise, would support the dollar.
A 1.5 yen surge by the dollar subsequent to US trade deficit figures raises eyebrows regarding yen selling intervention by Japanese officials as it fell towards a 2-week low of 107.30. US bilateral deficit with Japan declined 5% to $6.1 billion.
Markets would be keenly looking forward to Japanese machinery orders data in September for better clues on the Japanese economic outlook.
Sterling fell to as low as the early 1.84 levels amidst a general dollar resurgence. Bank of England’s quarterly inflation report indicated risks to have eased in the prior 3 months, almost eliminating chances of future rate hikes and further hurting the cable.