Gold put in a considerable move on the back of this dovishness, and as we had written last month, Gold Prices Shine When Central Bankers Scurry into Action. For those looking to play a continuation of the dovish-Central Bank theme, look to Gold: Some will say ‘metals,’ or ‘commodities’ for similar plays, but evaluating recent performance, specifically the ratio of gold prices to silver prices would indicate that this isn’t a broad-based commodities or metals play.
One of the more prominent areas for that USD-weakness to show up has been against the Yen. Yesterday’s FOMC decision likely brought a two-pronged effect to the Yen: We’re likely seeing capital flows from USD to JPY on this more dovish FOMC read, but we’re also likely see a deflection of safe-haven flows from the US Dollar into the Japanese Yen. So say, for instance, investors in China. With the Fed taking a more dovish tone, there are fewer reasons for that Chinese investor to move capital into USD rather than JPY.
