August 19, 2019 / 5:01 PM / 3 months ago

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

    * 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

 (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
    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.
    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
    Currency bid prices at 12:47PM (1647 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 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
 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/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)
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