Safe-haven Yen, Franc gain as Fed mirrors a gloomy photograph

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Safe-haven Yen, Franc gain as Fed mirrors a gloomy photograph

On Thursday, the safe-haven Japanese Yen and Swiss Franc gained as prospects of a swift recovery of the US economy had beaten a hasty retreat following the grave projections orchestrated by the US Federal Reserve on Wednesday, while Fed policymakers alongside the Fed Chair Powell were quoted saying that it would take years for the US economy to regain the jobs lost in the light of a ludicrous pandemic outbreak.

In point of fact, Wednesday’s FOMC minutes had revealed a number of dire projections for the US economy what Wall St. analysts were contemplating as the first US Central Bank projection in the pandemic era, while followed by the two-day long June 9th-10th policy meeting of the US Fed, Powell said that the US economy would likely to face off an unemployment rate of 9.7 per cent by end-2020 and the interest rates would remain at a near-zero level until at least 2022.

Besides, Fed’s Powell had also added that the US economy would likely to contract by 6.5 per cent this year, compared to the Trump Administration’s target of a growth of 3 per cent.

US Dollar took a beating after Fed’s projection

Looking at the pointy ends, the US Dollar index (DXY) measured against a basket of six major currencies took a heavy beating on Wednesday, however, losses were thinned on Thursday as the markets had absorbed the shock that the US Fed came up with and against a basket of six rival currencies, the US Dollar Index (DXY) was down by 0.1 per cent to 96.04 on Thursday midday European trading.

Besides, against the safe-haven Swiss Franc, the US Dollar was hovering near its three-month lows to $0.9419, while the American currency was languishing near its one-month low against another safe-haven currency Japanese Yen to 107.06 yen per dollar.

Meanwhile, projecting a downbeat texture for the American Dollar in a near- to intermediate-term outlook given the dour economic forecasts from the US Federal Reserve, the head of FX Strategies at UBS Global Wealth Management, Thomas Flurry said on Thursday, “Our assessment after the FOMC’s statement is that the trend for a weaker dollar that has set in June is likely to continue as the Fed has shown no indication that it will stop this trend”.