Dollar Hold Steady, While Aussie Falls
The U.S. dollar held steady in early Tuesday trading, sticking to its tight range after a strong showing the previous week, while the Australian dollar lost ground after comments from the central-bank governor.
The ICE dollar index , which tracks the U.S. currency against six others, sat at 80.612, barely changed from 80.606 late Monday in North America. The WSJ Dollar Index , a rival gauge of the U.S. unit, was unchanged at 72.89.
Noting a nearly 2% gain for the ICE dollar index the previous week, Crédit Agricole analysts said the U.S. currency “is likely to consolidate its gains over the short term ahead of Friday’s U.S. October employment report.”
“Nonetheless, despite some near-term consolidation the [dollar] looks set to gain further over the coming weeks, helped by the fact that the market had already squared a lot of long positions over past weeks,” Crédit Agricole said in a note early Tuesday.
Economists polled by MarketWatch expect on average for October nonfarm payrolls to rise 100,000 after a 148,000 increase in September, with the unemployment rate ticking higher to 7.4% from 7.2%.
BK Asset Management managing director Kathy Lien said a weaker U.S. jobs report would likely be function of last month’s government shutdown, dampening the effect of any surprises in the data.
“We should see the dollar sell off if payrolls are weak, but the losses could be limited,” Lien wrote late Monday.
“The bigger reaction could actually be to a stronger payrolls report. If [the gain in nonfarm payrolls] exceed 150,000, we expect to see an aggressive short squeeze in the dollar because the stronger number would consistent with the Fed’s less pessimistic views,” she said, referring to the outlook from the Federal Reserve.
Sideways movement for the euro , which is the biggest component in the ICE dollar index’s comparison basket, helped restrict movement for the greenback. Europe’s shared currency bought $1.3504 early Tuesday, negligibly down from $1.3510 late Monday.
The euro came under heavy pressure last week, in part due to data showing slowing inflation in the currency bloc, raising the chances for further easing there.
“Some economists are even calling for another rate cut by the [European Central Bank] on Thursday. While we believe this forecast is overly aggressive, the reasoning is sound because inflation is a top priority for the central bank, and there’s a good chance that [ECB President] Mario Draghi will be less optimistic and appear more inclined to ease monetary policy,” said BK Asset Management’s Lien.
The British pound saw more action, rising to $1.5970 from late Monday’s $1.5951, with the Bank of England also due to issue a policy decision Thursday.
Over in Asia, the Japanese yen strengthened, with the U.S. dollar moving as low as ¥98.22, before rising back to ¥98.50. The rate was still below late Monday’s ¥98.68.
Aussie sinks on policy statement
Amid a quiet day for many of the major currency pairs, the Australian dollar stood out by falling to 94.76 U.S. cents, down from 95.08 U.S. cents late in the previous day.
The losses came after the Reserve Bank of Australia held interest rates steady, but with its governor saying the Aussie dollar remained overvalued.
“The Australian dollar, while below its level earlier in the year, is still uncomfortably high,” said Gov. Glenn Stevens in a statement accompanying Tuesday’s policy decision. “A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy.”
Source : Marketwatch
