The dollar hit a record level of weakness versus the Canadian dollar as the Bank of Canada decided to raise its benchmark interest rate on Wednesday. The institution raised the interest rate by 25 basis points to 1%, which is the second increase in July. The greenback declined by about 1.9 percent against the Canadian dollar, but at the same time rose against the yen and other asset havens as Trump announced that an agreement has been reached to increase the US debt ceiling.
The US dollar appreciated by more than half a percent against the Japanese yen to 109.39 yen per dollar, shrinking from the eight-day bottom of 108.47 reached in early trading. The dollar recorded its biggest daily rise against the yen for the past two weeks.
Fed Vice President Stanley Fisher resigned and his decision enters into force in mid-October. This Fischer action will allow Donald Trump to transform the Fed leadership before the mandate of the current central bank governor Janet Yellen expires.
The probability that we will see a new Governor of the Fed after February 2018 is great after Trump has repeatedly declared his disagreement with the policy pursued by Yellen. In the long run, the tension in the Fed will add to the US currency.
The euro has remained robust in anticipation of the ECB meeting where market participants do not expect a drastic change in rhetoric or more aggressive incentives and monetary policy commitments. In the early hours of Thursday, the single currency rose 0.1% to 1.1928 dollars per euro, but the exchange rate is at the peak of 1.2070, the highest level since January 2015.
A Reuters poll among economists has shown that a very small number of the experts expect Mario Draghi to declare a reduction in the amount of purchased assets that are part of the measures aimed at stimulating the economy after the financial crisis. Only a month ago, most of the economists surveyed by Reuters said they expected an aggressive tone in this regard at the next meetings. Markets also expect to hear Draghi’s stance on the rising euro.