The US dollar found itself heading down into the forex doldrums on Wednesday after mounting concerns among traders that the country’s central bank was about to act to limit bond yields.
The Federal Reserve looked set to make its announcement later on Wednesday, and dollar traders appeared to be scared by both the prospect of moves to control yield curves and also by the possibility of it hinting that it would do so in the future.
Analysts said that they were convinced that the option was on the table – though it remained unclear whether policymakers would commit to it right now.
Sensitivities around this caused the dollar to go down in value though.
High yields caused by market sentiment that appeared to suggest that the US economy was starting to get back on its feet pushed the dollar up in value.
The dollar index, which is a device used by traders to allow simple performance comparisons between the greenback and various other global currencies, went down on the news that yield curve control could be around the corner.
The currency was spotted down by two-fifths of a percentage point in this index, reaching 96.061 at one stage.
It had previously gone down to 95.973 at one stage – a position it had not been at since the middle of March.
The markets did, however, appear to be fairly certain that there would be no change to the country’s interest rate levels when the Fed announces its decision.
Elsewhere around the world, the dollar’s losses were other currencies’ gains.
In Europe, the single currency was up to its best position for three months – it was seen at $1.1389 at one stage.
The British pound was also up to its best point in the same period, reaching $1.2803 at one point.
The Swiss franc managed to complete the three-month-high hat-trick, seeing a position of $0.9514 against the dollar.
Other safe-haven currencies also managed to swoop in and take advantage of the dollar’s decline.
The Japanese yen, which is widely considered to be the world’s premier safe-haven currency, was up.
In that pair, the greenback dipped to 107.26, which was its worst position in a fortnight.
Uncertainty continues to be a key factor in trading decisions in the forex markets, and the week remains highly unusual in a number of ways compared to previously well-established foreign exchange market dynamics.
Safe-haven currencies have risen, which in a previous age would have indicated that risk sentiment was firmly not in demand.
However, in a conflicting picture, risky currencies such as the Australian dollar managed to surge on Wednesday after taking a brief day off their rises.
The Aussie was up by half a percentage point against the dollar, placing it at $0.6996 at one stage.
This was almost its best position for 11 months.
Over in New Zealand, the dollar there went up by 0.3% against the greenback – this left it selling for US$0.6532.
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