Dollar Inches Lower As Monetary Policy Dominates
The dollar slouched modestly in quiet forex trade early Tuesday, maintaining its downward trajectory as monetary policy remained the markets’ top focus.
The ICE dollar index , a measure of the U.S. unit against six other currencies, eased to 80.725, down from 80.774 late Monday and off from 80.824 at the end of the previous week. The WSJ Dollar Index saw similar movement, inching down to 73.15 from 73.19.
“The major investment theme driving markets remains the relative outlook between the major central banks,” Credit Agricole wrote, echoing the views of many other analysts.
While little major data were due out Tuesday, RBC Capital Markets senior forex strategist Sue Trinh pointed to a speech from departing Federal Reserve Chairman Ben Bernanke on “Communications and Monetary Policy” as the centerpiece of the day.
Looking forward, the Credit Agricole analysts warned of possible downside for the greenback.
“We suspect that in the very short run, the dollar is likely to remain vulnerable to a deeper correction against both developed and emerging-market currencies, given the data calendar is unlikely to provide impetus to drive U.S. yields higher,” they wrote early Tuesday.
Still, they saw any such correction as likely to be short-lived, with the possibility that investors would “shift back into the dollar ahead of [U.S.] November payrolls,” due out on Dec. 6.
Among the major currencies pairs, the Australian dollar was among the most active, rising to 93.89 U.S. cents from 93.65 U.S. cents late Monday, after the Reserve Bank of Australia issued minutes from its Nov. 5 meeting which affirmed that the central bank was still open to further interest-rate cuts if needed.
The most traded European currencies moved sideways, with the euro buying $1.3508, little changed from Monday’s $1.3506, while the British pound sat at $1.6100, up fractionally from $1.6098.
The dollar softened against the Japanese yen early Tuesday in East Asia, but it later recouped much of the loss to trade at ¥99.86, almost from flat from its ¥99.90 level late Monday.
Source : Marketwatch
