Two potential adverse events for the dollar

Markets are now ready to live an important day. Stakeholders looking forward to the outcome of the meeting of the US Federal Reserve monetary policy. The presentation of the semi-annual report of the Treasury on any manipulations on the foreign exchange market will be bonus. Two potential adverse events for the dollar. Currency traders therefore did not inordinate risk yesterday. Later in the day, the single currency is exchanged at 1,2754 dollar, after be settled in the first part of session to 1,2663. Against the yen, the dollar gave 0.3, to 111,32 yen.

The decision of the Federal Reserve is no doubt for the interveners: the Central Bank should raise this evening by 25 basis points the objective of federal funds, to 5. Subsequently, however, is more uncertain. For the market, the break is likely. According to a survey conducted by Bloomberg last week, 17 of 22 specialists in values of the Treasury expect a prolonged standstill, until August at least. In fact, the release of the Fed will be dissected with attention to detail.

Flexibility to statistics

"The Federal Reserve should remain optimistic with regard to growth, while stressing the probability of a slowdown in the second quarter, believes the team of Ixis IPC." On the side of inflation, the Fed will continue to emphasize the risks related to the full utilisation of production capacity, in particular after a pronounced increase of hourly wages, and energy prices. "In the end, the Central Bank should leave the door open to a pause, while stressing the degree of dependence of these future decisions about the evolution of economic statistics.

Last week, Ben Bernanke, the Chairman of the institution, had entrusted his soul States at a dinner, CNBC was the echo. He felt have been misunderstood by market in his speech before the Joint Economic Committee of Congress. Stakeholders had read his words the certainty of a break while he intended to emphasize a greater flexibility in the statistics. Light positioning extreme of the market, "If the Fed suggests that new rate hikes are possible, the dollar was likely to bounce", said BNP Paribas Exchange team.

Remains whether the content of the semi-annual report of the Treasury on foreign exchange, expected as early as this evening, the will. For David Woo, strategist changes at Barclays Capital, "there is a high probability that the name of China should be mentioned among the countries manipulating their currency". Unless it decides in extremis to introduce more flexibility. Yesterday, the yuan always maintained over the 8 for $ 1 to 8,0044 Yuan. The United States are no longer the only ones to blame Beijing. For the first time, the G7 explicitly mentioned China in his release.

The BNP Paribas Exchange team has noted the statements of the spokesman for the Treasury that the report would focus on the actions taken by China to meet its commitment to implement a more flexible exchange rate regime. "You'll see that China is working," said Treasury spokesman. For BNP Paribas, these comments suggest that the United States refrain from accusing Beijing.

A strong signal

A reassessment in extremis of the Chinese yuan accompanied by a report from the US Treasury not mentioning China would encourage the yen, according to David Woo. On the other hand, the absence of re-evaluation and the mention of China by the Treasury could cause a leak to the euro or the Swiss franc and volatility to soar, for fear of protectionism.

In the meantime, the yen gained ground against the dollar yesterday, to its highest level since September 2005. According to the Jiji Press Agency, the BoJ could revise upward its prognosis for the Japanese economy, including replacing the term "recovery" by "expansion". What would be a signal strong.