Dollar Eases With Bernanke Testimony In Focus
The U.S. dollar eased further in early Monday trading after losing ground last week, while the Australian dollar gained after Chinese economic data failed to show the sharp slowing some had feared.
The ICE dollar index , which tracks the U.S. currency against six rivals, inched down to 82.933 from 82.997 late Friday in North America, when the dollar had risen modestly amid euro-zone concerns, but still ended the week down 1.7%.
The WSJ Dollar Index , which uses a slightly larger comparison basket than the ICE, showed a somewhat larger drop, falling to 74.98 from 75.40.
Last week’s losses for the greenback were largely a function of comments by Federal Reserve Chairman Ben Bernanke, who said the central bank wouldn’t immediately raise interest rates once unemployment fell to 6.5%, the Fed’s target for beginning to ease its monetary stimulus.
Bernanke is due to testify to Congress on Wednesday and Thursday, with Crédit Agricole analysts saying the event may hold the key for the U.S. currency’s moves this week.
“In the wake of last week’s strongly dovish interpretation of his comments (and severe [dollar] reaction lower), we look for a more measured, slightly hawkish, policy tone” from Bernanke, they wrote Monday.
“Indeed, in attempting to break the recent market cycle of investor over-reaction, the Fed chairman will likely attempt to further clarify the timing distinction” between when the Fed will slow its bond purchases and when it will hike interest rates, they wrote.
Crédit Agricole said that barring a “dovish surprise” from Bernanke, a rising dollar would likely send the euro down toward its near-term support level of $1.2850.
On Monday, the euro bought $1.3067, little changed from $1.3060 late Friday, while the British pound saw similarly flat action, trading at $1.5118.
With Japanese markets closed Monday for the Marine Day holiday, the yen was likewise range-bound, with the dollar edging down to ¥99.25 from Friday’s ¥99.40.
Aussie up on in-line China data
The Australian dollar gained to 90.92 U.S. cents from 90.60 cents at the end of the previous week, managing to hold its gains after China’s second-quarter economic growth rate printed at 7.5%.
The Chinese growth rate matched expectations despite fears of a downside surprise after China’s state media quoted the nation’s finance minister late last week as suggesting growth would slow to 7%, missing the government’s 7.5% target for the year.
The state-run Xinhua news agency later corrected its report to say the finance minister believed the economy would in fact rise by 7.5% in 2013.
Australia’s currency is often sensitive to changes in the economic outlook for China, its key trading partner.
Source : Marketwatch
