Dollar Inches Higher Ahead Of Data, Rate Calls

Ahead of a host of economic data and central-bank decisions later this week, major currencies held to tight ranges Wednesday, with only the Japanese yen and Australian dollar showing significant movement.

The ICE dollar index  , tracking the greenback against six rivals, sat at 82.369, fractionally higher from its 82.344 late Tuesday in North America.

The WSJ Dollar Index  , which uses a wider comparison base, was also little changed at 74.54 from late Tuesday’s 74.53.

The U.S. unit’s holding pattern came amid a flurry of geopolitical developments, with leaders from the U.S. opposition Republican Party saying they would back President Barack Obama’s push for military action against the Syrian regime, making a strike more likely.

Meanwhile, a summit of leaders from the Group of 20 major economies was due to begin Thursday in St. Petersburg.

“Looking forward, we expect no major shift in [dollar] sentiment today despite a number of data scheduled for releases, as investors are set to stay cautious with one eye on the Syria development ahead of the G-20 meeting starting tomorrow, and the other on the jobs reports later this week,” analysts at Crédit Agricole wrote on Wednesday.

The jobs report, detailing the change in U.S. nonfarm payrolls and unemployment rate for August, was due out Friday, with economists polled by MarketWatch expecting on average a net gain of 170,000 jobs.

The employment numbers were likely to dominate the week’s data, given the implications for the timing of the Federal Reserve’s plan to begin slowing the pace of its monetary stimulus.

But nearer-term, BK Asset Management forex managing director Kathy Lien said the Fed’s monthly “Beige Book” — a region-by-region report on the state of the U.S. economy — as likely to drive the dollar.

“We expect Fed districts to report a continued but uneven recovery that will keep the market guessing about when the central bank will taper,” Lien wrote Wednesday.

“For the U.S. dollar, this could mean a bit of profit-taking but not a significant sell-off. However, if the Beige Book report is optimistic, U.S. 10-year bond yields  could edge closer to 3%, taking the dollar higher with it,” she said.

Among the major currency pairs, the Australian dollar and Japanese yen saw the most movement.

The yen slipped ahead of a Bank of Japan decision Thursday that could include some additional easing moves to offset plans to increase the national sales tax, with the dollar  rising to ¥99.56 from ¥99.30 late Tuesday.

The Aussie dollar  advanced to 90.94 U.S. cents, up from 90.40 U.S. cents, extending the previous day’s gains after the central bank left the policy interest rate unchanged but issued a statement seen as slightly less dovish than previously.

On Wednesday, Australian gross domestic product data showed the economy expanded by 0.6% in the April-June quarter, in line with expectations.

Royal Bank of Canada strategist Su-Lin Ong said the data “confirmed a continued sub-trend pace of activity,” offering scope for further rate cuts, which she said was “negative for bonds and supportive of the Australian dollar.”

Other currencies saw little to no movement, with the euro  buying $1.3165 from $1.3166 late Tuesday, with the European Central Bank due to hand down its policy decision Thursday.

The Crédit Agricole analysts said they “do not expect the ECB to take on a more dovish monetary policy stance … irrespective of weaker-than-expected euro-zone inflation data for the month of August.”

Given this and further economic recovery in the euro bloc, they maintained their view “that there is only limited [euro] downside from the current levels, at least in the short term.”

Likewise, the British pound  held at $1.5561, compared to $1.5559 late the previous day, with the Bank of England’s policy decision also slated for Thursday.

The Canadian dollar  was also little changed, with the U.S. dollar at C$1.0538. The Bank of Canada’s policy announcement was slated for late Wednesday, with most economists tipping the central bank to keep its benchmark rate at 1%.

Among the emerging-market currencies, the Indian rupee moved lower, sending the dollar  up to 67.73 rupees for a gain of 0.2% for the day, according to FactSet data.

Still, the Indian unit remained below its all-time high of 69.17 rupees, reached late last month.

The Reserve Bank of India’s new governor — former International Monetary Fund chief economist Raghuram Rajan — set to take up his post later in the day.

Source : Marketwatch