Dollar Slightly Gains Ahead Of Fed Events

The U.S. dollar edged modestly higher Monday ahead of key Federal Reserve events this week that may offer more signals about when policy makers will begin tapering monetary stimulus.

The ICE dollar index  , which tracks the unit against six major rivals, moved up to 81.322 from 81.236 late Friday in North America.

However, the WSJ Dollar Index  , which uses a slightly wider comparison basket than the ICE index, was at 73.53, down from 73.55.

The ICE dollar index rose 0.2% last week, but the gain was only the index’s second advance in six weeks.

The greenback has been hurt in part by mixed data that have prompted questions about the strength of the U.S. economy and whether the Fed will decide to slow the pace of its monetary stimulus as early as next month.

The Fed currently buys $85 billion in assets monthly to support economic growth.

In terms of data in the week ahead, two reports will focus on the U.S. housing market.

But the highlight of the week is expected Wednesday with the release of minutes from the Federal Reserve’s policy meeting on July 30-31. The minutes may offer more information about the Fed’s stimulus plans, including how many policy makers were ready to slow asset purchases.

Also, central bankers from around the world will gather later this week in Jackson Hole, Wyo., for their summer retreat.

Most top Fed officials who have spoken since the July meeting haven’t ruled out slowing bond buys in September, but investors will still watch for any clues to tapering the stimulus talk at the Jackson Hole conclave.

There “is no doubt that they will start tapering soon enough,” said Ava Trade chief market analyst Naeem Aslam in note Friday, “but perhaps the biggest worry for the market should be what will be the pace of this tapering and how aggressive Fed will be when it comes to winding down their ultra-loose quantitative-easing program.”

The Fed has said improvement in the economy would call for a reduction in asset purchases. A slowdown in stimulus could be dollar-positive, particularly if it leads to higher Treasury yields as the government pulls back on bond purchases.

Treasury yields move inversely to prices, and higher yields make dollar-denominated assets more attractive.

But last week, the dollar wasn’t able to significantly gain against most other majors, even though Treasurys fell, pushing the 10-year yield   to a two-year high of 2.824%.

June figures from the U.S. Treasury Department last week “revealed selling of Treasurys by Chinese and Japanese investors, which at least explained in part why the [dollar] did not track the higher yield as much recently,” Credit Agricole CIB analyst Anthony Lam told clients Monday.

Among the major currency pairs Monday, the dollar  rose against the Japanese yen to trade at ¥97.62 compared with late Friday’s level of ¥97.51.

The euro   bought $1.3327, down slightly from $1.3334 on Friday.

Meanwhile, the British pound  traded at $1.5627, up fractionally from $1.5624 on Friday.

The Australian dollar  rose to 92.13 U.S. cents from 91.90 U.S. cents. The Aussie picked up 0.6% last week versus its U.S. counterpart.

Source : Marketwatch