Dollar Inches Up As Traders Await FOMC, GDP Data
The dollar climbed against other major currencies Wednesday, signaling caution ahead of a busy day that will bring fourth-quarter economic data in the U.S. and the Federal Reserve’s latest monetary-policy decision.
The ICE dollar index , which measures the greenback against a basket of six other major currencies, climbed to 79.597 from 79.527 in North America late on Tuesday.
The WSJ Dollar Index , which uses a slightly larger comparison basket, rose to 70.87 from 70.80 late Tuesday.
Trading activity in major pairs was relatively quiet amid expectations that both the Federal Open Market Committee meeting and the U.S. economic data were likely to match expectations.
“This evening’s FOMC meeting isn’t expected to contain any surprises, or at least any change in tone after the minutes from the last meeting showed that ‘several’ members thought it would be appropriate to ‘slow or stop’ [asset] purchases well before the end of 2013,” RBC Capital Markets senior currency strategist Sue Trinh said.
Trinh added that the bar of expectations from the Automatic Data Processing payrolls numbers, and the advance estimate of fourth-quarter gross domestic product — both of which are due before the FOMC meeting — “has been set a lot lower than previous reads.”
According to estimates compiled by MarketWatch, figures to be released by the Commerce Department are estimated to show that the U.S. economy grew 1% during the fourth quarter, slowing sharply from the 3.1% expansion in the preceding quarter.
The ADP figures, meanwhile, are projected to show an addition of 173,000 private-sector jobs in January, following an increase of 215,000 jobs in December.
Among major currency pairs, the dollar was purchasing 90.91 yen, up from ¥90.71 in New York trade.
The euro was fetching $1.348, slipping from $1.3490, and 122.57 yen, up from ¥122.39.
Kathy Lien, managing director at BK Asset Management, wrote in a note to clients that after a hefty recent rally for the dollar against the Japanese unit, the U.S. GDP growth would need to be 2% or more for the dollar-yen pair to rise further.
“If growth is less than 1%, [dollar-yen] would decline, but we would be surprised if GDP slowed that much” in the fourth quarter, Lien said.
Referring to the FOMC, she said that virtually unchanged language in the statement might only have a limited impact on the dollar.
“However, if they change the statement enough to suggest that they have grown less dovish, we could see a new leg higher in [dollar-yen],” Lien said.
Among other major pairs, the British pound was changing hands for $1.5746 as compared with $1.5761, while the Australian dollar was fetching $1.0471, little changed from $1.0472.
Marketwatch
