FOREX-Yen, Swiss franc slide on optimism about central bank action

By Gertrude Chavez-Dreyfuss
Updated

* China unveils interest rate reform, boosts risk appetite * Focus on Fed's Jackson Hole symposium * Markets expect monetary leaders to announce key measures * Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (Updates prices, adds new comment) By Gertrude Chavez-Dreyfuss NEW YORK, Aug 19 (Reuters) - The safe-haven yen and Swiss franc retreated against the dollar on Monday, as risk sentiment gradually improved after a week of turmoil on hopes that major central banks would look to launch fresh stimulus measures to lift their sluggish economies. The Japanese currency fell for a third straight session versus the greenback, while the Swiss unit slid to a two-week low against the dollar. Optimism about government action to avert recession concerns in the United States, which was triggered by last week's inversion in the U.S. bond yield curve, rose in advance of the U.S. Federal Reserve's symposium in Jackson Hole, Wyoming, toward the end of the week, where central bankers could announce key measures. China also unveiled interest rate reforms expected to lower corporate borrowing costs, which helped lift the market's mood, while the prospect of Germany's coalition government ditching its balanced budget rule to take on new debt and launch stimulus steps also boosted risk appetite. "We think the more accommodative central bank backdrop should help insulate the downside in risk markets," said Mazen Issa, senior FX strategist at TD Securities in New York. "With markets fixated on the (Jackson Hole) symposium later this week and little data to deter focus, we are biased to see an extension of (last) Friday's relief rally in risk extend in the coming days, barring another Trump Tweet-bomb," he added, referring to U.S. President Donald Trump's penchant for announcing policy or making market-moving comments on Twitter. In midday trading, the dollar rose 0.2% against the yen to 106.53 yen, helping push the dollar index higher on the day to 98.246. The euro was slightly up versus the greenback at $1.1095, after falling 1% last week, its biggest weekly drop since early July. Against the Swiss franc, the dollar climbed 0.2% to 0.98 franc. Sight deposits at the Swiss National Bank posted another big weekly rise, indicating more intervention from policymakers. FED EYED Investor optimism is also likely to be capped before a speech by Fed Chairman Jerome Powell later this week at the Jackson Hole conference. Market strategists believe his comments will be aimed at reassuring nervous markets that the Fed will remain in an easing stance and set the stage for more rate cuts after a quarter-percentage-point rate cut in July. "The Jackson Hole summit would be the perfect venue for the Fed to set or reset market expectations," said Kathy Lien, managing director of FX strategy, at BK Asset Management. "If they're committed to lowering interest rates in September, we should hear central bankers downplay the improvement in spending and retail sales." Money markets are pricing in a cumulative 67 basis points of rate cuts from the Fed by the end of the year. ======================================================== Currency bid prices at 12:47PM (1647 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1095 $1.1089 +0.05% -3.26% +1.1113 +1.1088 Dollar/Yen JPY= 106.5300 106.3600 +0.16% -3.38% +106.6900 +106.2500 Euro/Yen EURJPY= 118.20 117.96 +0.20% -6.35% +118.4700 +117.8700 Dollar/Swiss CHF= 0.9801 0.9782 +0.19% -0.13% +0.9820 +0.9774 Sterling/Dollar GBP= 1.2129 1.2149 -0.16% -4.92% +1.2172 +1.2105 Dollar/Canadian CAD= 1.3311 1.3270 +0.31% -2.39% +1.3316 +1.3252 Australian/Doll AUD= 0.6773 0.6780 -0.10% -3.93% +0.6799 +0.6768 ar Euro/Swiss EURCHF= 1.0874 1.0848 +0.24% -3.38% +1.0898 +1.0850 Euro/Sterling EURGBP= 0.9146 0.9129 +0.19% +1.80% +0.9169 +0.9113 NZ NZD= 0.6414 0.6427 -0.20% -4.51% +0.6443 +0.6410 Dollar/Dollar Dollar/Norway NOK= 8.9689 9.0110 -0.47% +3.82% +9.0163 +8.9606 Euro/Norway EURNOK= 9.9521 9.9933 -0.41% +0.47% +10.0007 +9.9440 Dollar/Sweden SEK= 9.6661 9.6560 +0.13% +7.83% +9.6807 +9.6466 Euro/Sweden EURSEK= 10.7267 10.7124 +0.13% +4.51% +10.7464 +10.7089 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Saikat Chatterjee in London; Editing by Jonathan Oatis and Chizu Nomiyama)