Dollar Weakens Before U.S. Markets Reopen

The dollar slipped further during Asian trading hours Wednesday, although major currency pairs moved in narrow ranges on caution ahead of the reopen of U.S. financial markets later in the day for the first time after hurricane Sandy.

The ICE dollar index , which measures the greenback’s performance against a basket of six other major currencies, edged down to 79.931 from 79.942 in North America late Tuesday.

Adam Myers, a senior currency strategist at Credit Agricole, wrote in a report that the dollar’s recent weakness “appears likely to be unwound today [Wednesday] as normal U.S. trading resumes.”

The euro was changing hands at $1.2959, easing from $1.2965 but staying close to recent gains, on positive news from Europe in the form of strong earnings and economic data showing a smaller-than-expected contraction in Spanish gross domestic product.

Myers said he saw little scope for a deeper sell-off in the euro, adding that attempts to draw parallels with the sell-off in the euro-dollar in the weeks after Hurricane Katrina struck in 2005 due to dollar repatriations were “premature.”

“For now at least, we think investors should anticipate more than a reversal of this week’s [U.S. dollar] sell-off until a clearer perspective of Sandy-related damage becomes available,” he said.

The dollar  also traded in a tight range against the Japanese yen, buying ¥79.60, compared with ¥79.61 late Tuesday.

The British pound  was at $1.6081, inching up from $1.6076.

Marketwatch