Dollar Tests Eight Month Lows; Markets Edge lower While Oil Find Support

The Bank of Japan’s unexpected move to hold the monetary policy rates unchanged led weakness into the U.S. Dollar (CURRENCY:USD), which was seen trading at eight-month lows against major currencies during the Asian trade.

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US Dollar dips

USD tested one and a year half lows against the Japanese Yen at 107.09, down by 0.93%. The BoJ startled the market participants by holding its deposit rate to -0.1% and keeping asset purchase at ¥80 trillion per year. The decision follows the Federal Reserve’s policy announcement, where it kept its interest rates unchanged at near-zero levels. In other currencies, EUR/USD (EURUSD) strengthened to 1.1379, up by 0.25%. On the data side, the forex investors will be looking forward to personal spending, employment costs and consumer sentiment later today.

Meanwhile, the Asian stock markets tread lower after the BoJ’s decided to stick to its existing policy rates while the concerns over the global economic health lingered on the market sentiment. Strengthened Yen at 18-month highs dampened trading in thinly-traded Asian equities with HANG SENG INDEX (INDEXHANGSENG:HSI) trimming the most by 1.41% to 21,085.

Dollar-denominated oil prices recover

At the same time, the European markets too made a soft opening with nearly all the major stock markets reporting early day losses. Among all, France’s CAC 40 (INDEXEURO:PX1) opened widely lower at 4,489.51, down by 1.49%. The U.S. markets already had a rough trade day a day earlier as Dow Jones Industrial Average (INDEXDJX:.DJI) and S&P 500 INDEX (INDEXCBOE:SPX) closed 1.17% and 0.92% lower at 17,830.76 and 2,075.81 respectively.

iPath S&P GSCI Crude Oil Total Return (NYSEARCA:OIL) prices pared early day losses to swing back into positive territory. Brent Crude paced up 0.35% to $48.31 while the West Texas Intermediate added up 0.54% to $46.28 per barrels during the early European hours. The weakness in the U.S. dollar and declining U.S. output is supporting the oil prices, according to experts.

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