US Dollar gains against euro, franc on risk appetite

New York (Oct 7)  Optimism toward global economic growth boosted risk appetite and drove the U.S. dollar higher against the euro and Swiss franc on Wednesday, while the yen gained against the dollar after the Bank of Japan left monetary policy unchanged.

Expectations for the first Federal Reserve rate increase since 2006 have been pushed out to 2016, analysts reiterated, while the potential for more stimulus from the European Central Bank and Bank of Japan have also contributed to a backdrop of accommodative central bank policy.

Analysts said the view that central banks will uphold easy monetary policy over the near term has reassured traders and helped oil prices, which were also lifted by data showing falling supply and higher demand, rise on Wednesday. The rise in oil prices also boosted risk appetite.

"Investors are a bit more confident about the global recovery and the fact that central banks aren't going to get in the way of the global recovery," said Chris Gaffney, president of EverBank World Markets in St. Louis.

The U.S. dollar benefited from the greater risk appetite by rising against the euro and Swiss franc, which traders tend to buy and hold during times of concern given their low yields and sell in times of greater risk appetite.

Concerns that a later Fed rate hike would limit investment flows into the United States capped dollar the gains against the euro and Swiss franc, analysts said.

The dollar slipped slightly against the yen after the Bank of Japan left monetary policy steady despite talk the central bank would ease. The dollar was last down 0.2% against the yen at 120.005 yen.

The dollar also slipped against riskier emerging market currencies such as the Brazilian real and Russian ruble, while commodity currencies such as the Australian and New Zealand dollars also rose against the greenback.

The dollar was last down 1.5% against the real at 3.7956 reals, while the Australian dollar was last up 0.78% against the greenback at US$0.7221.

The euro was last down 0.39% against the dollar at US$1.12280. The dollar was last up 0.43% against the franc at 0.97135 franc. The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.15% at 95.592.

Source: TheEdgeMarkets