US Dollar & FED: USD, NZD & CHF Exchange Rates, Forecasts, and the Central Bank Policy

October 29, 2014 - Written by John Cameron

STORY LINK US Dollar & FED: USD, NZD & CHF Exchange Rates, Forecasts, and the Central Bank Policy

Yesterday evening brought the latest Federal Reserve policy announcement and the exchange rate markets' anticipation of what lies ahead has radically altered the relative value of the US Dollar (currency:USD).

The USD has lost ground against a trade-weighted basket of currencies for the fourth trading day on the trot, making this its worst period of performance since mid-Summer.

The following rates have been updated after the FOMC announcement:

The Pound to US Dollar exchange rate today is converting -0.78 per cent lower at 1.60157 GBP/USD.
The Euro to US Dollar exchange rate is -0.81 pct lower with a conversion rate of 1 EUR equals 1.26355 USD.
The Canadian Dollar to US Dollar exchange rate today is converting -0.14 per cent lower at 0.89398 CAD/USD.
The Australian Dollar to US Dollar exchange rate converts -0.71 per cent lower at 1 AUD is 0.87994 USD.
The New Zealand Dollar to US Dollar conversion rate is -1.46 pct lower at 0.78178 NZD/USD.

Neutral Policy Stance Forecast From Federal Reserve

Most analysts expect the Fed to stick with a neutral policy stance and to maintain that it does not hold a pre-determined plan for when interest rates will be increased. Peter Gorra, Head of Foreign Exchange Trading in New York City at BNP Paribas explained earlier that the US central bank is likely to, ‘straddle the fence a bit more and continue to be data dependent for future policy moves. They’ll give a little bit of meat to the hawks and a little bit of meat to the doves’.

Watch For ‘Considerable Time’ Guidance

Any concession to economists clamouring for a tightening of policy from the world’s premier reserve bank is likely to involve the Fed dropping its previous guidance that US rates will remain at a low level for a ‘considerable time’. Any failure to use the ‘considerable time’ phrase will be likely to trigger a renewed bout of support for the Greenback, potentially sending the Pound Sterling US Dollar exchange rate back down below the psychologically key 1.6000 threshold in the near-term.

Swiss Franc Forecast: SNB Referendum Could Sink The CHF

Meanwhile, the possibility of action from another major central bank has altered the value of its local currency. A referendum in Switzerland, due to take place on the final day of next month, has elicited market rumours that the Swiss National Bank (SNB) may be forced to ditch the controversial currency cap which it instigated three years ago. Volatility for the euro Swiss Franc exchange rate EUR CHF has climbed to its highest level for two years ahead of the vote, which could decrease the SNB’s powers to carry out changes to monetary policy. Peter Rosenstreich of Swissquote Bank elucidated, ‘should this go through it’s going to have profound effects on the SNB’s ability to hold the floor Looking out at the volatility curve you’re starting to see people are pricing it in. Not tomorrow, but two or three months down the line, people are expecting something to happen.’

NZ Dollar Forecast: No Change Expected From RBNZ

Elsewhere, the latest policy decision from the Reserve Bank of New Zealand (RBNZ) is due out later tonight and analysts are anticipating ‘no change’ in the local interest rate. However, most economists forecast that the RBNZ will once again attempt to jawbone the New Zealand Dollar (currency:NZD) lower in an effort to boost domestic exporters.

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TAGS: Currency Predictions Dollar Pound Forecasts New Zealand Do Forecasts