Circumspect Optimism Supports Dollar Ahead Of European Central Bank
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Circumspect optimism supports dollar ahead of European Central Bank

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Fragile investor confidence supported the dollar and weakened the yen on Wednesday, but foreign currency markets kept to tight ranges before the group of major central bank meetings on the next week.

Investor focus for the present time is devoted to the European Central Bank's meeting on Thursday, that is likely to push interest levels even more into negative territory.

The ECB could set the tone for future rate-setting decisions from the U.S. Federal Reserve and the lender of Japan in a few days, as well as for the broader global risk appetite.

For the present time, a cautious risk-on mood has prevailed after political crises that had hobbled markets, from Britain to Hong Kong, abated, taking the shine off safe-haven assets.

Bonds slid overnight as well as the yen hit 107.65 per dollar, its lowest since Aug. 1.

Overhanging the relief buying, however, are signs of a slowdown in global demand, that have offset recent positive developments in U.S.-China trade negotiations.

The euro (EUR=EBS), which includes shedding 3% since June, was flat at $1.1047. The dollar was flat contrary to the Australian dollar at $0.6860 and steady around the yen and the brand new Zealand dollar.

"Expect a quiet day of trading, with some support of risk, like a broader cyclical rotation continues," Australia and New Zealand Banking Group analysts said in an email.

"Speculation over if the ECB will enact a fresh QE program on Thursday is constantly on the ebb and flow."

ECB policymakers are leaning toward a package which includes an interest rate cut, a pledge to help keep rates low for longer and compensation for banks on the side-effects of negative rates, five sources acquainted with the discussion said the other day.

Alternatively, concerns have already been building that global central banks are achieving the limits of these stimulus options, especially people that have harmful interest levels and sub-zero long-term sovereign bond yields.


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