British pound gets a lift following Bank of England minutes
By William L. Watts and Myra P. Saefong, MarketWatch
LONDON (MarketWatch) -- The dollar saw a bounce scored in Asian hours fade in light European trading Wednesday, while the British pound pushed higher after minutes of the Bank of England's latest policy meeting confirmed an 8-1 decision to hold monetary policy steady.
The dollar index (DXY 82.15, -0.08, -0.09%) , a measure of the performance of the greenback against a basket of major currencies, stood at 82.108, down from 82.221 late Tuesday in North American trading.
The euro (EURUSD 1.2878, -0.0002, -0.0155%) traded at $1.2889, little changed from $1.2887 on Tuesday.
Against the Japanese yen, the dollar (USDYEN 85.3300, -0.2200, -0.2572%) went at ¥85.28, down from ¥85.58. And one euro (EURYEN 109.8900, -0.3300, -0.2994%) bought ¥109.99, down from ¥110.28.
There were no major euro-zone data releases on Wednesday, and the U.S. economic calendar is also light.
The euro found support Tuesday after solid demand at auctions of 1.5 billion euros ($1.9 billion) in Irish government debt and Spanish Treasury bills, helping ease worries about sovereign debt in the periphery of the euro zone.
But the doubts haven't been fully dispelled, analysts said.
The euro's inability to hold above $1.2900 due to weakening stock markets overnight supports the theory that structural worries remain, said Ulrich Leuchtmann, currency strategist at Commerzbank in Frankfurt.
Only rising risk appetite among investors is providing support for the European single currency, Leuchtmann wrote in a research note.
With spreads on Greek credit-default swaps still hovering around eight percentage points, it's clear the market doesn't believe the €110 billion aid package earmarked for Greece will work, though sovereign concerns probably won't be in focus over the next few days or weeks, he told clients.
The pound (GBPUSD 1.5634, +0.0055, +0.3530%) traded at $1.5667, up from $1.5566 late Tuesday, after having extended the gain in the wake of the release of minutes of the Bank of England's Aug. 4-5 policy meeting.
The minutes confirmed that the central bank's Monetary Policy Committee voted 8-1 to leave policy unchanged. Read about the Bank of England.
Market talk ahead of the minutes focused on the possibility of a three-way split, with some members calling for additional easing through the expansion of the Bank of England's asset-purchase program. Short-covering lifted the pound after the minutes showed no members voted for additional easing, analysts said.
MPC member Andrew Sentance cast a lone dissenting vote for the third consecutive month, arguing that the strength of the recovery and persistent above-target inflation warranted a hike of a quarter of a percentage point in the key lending rate to 0.75%.
The members also weighed arguments in favor of further easing, but in the end all but Sentance opted to leave rates and the size of the quantitative-easing program unchanged, saying they stood ready to move policy in either direction as warranted, according to the minutes.
For the medium term, foreign-exchange analysts at Crédit Agricole expect the dollar to "have a generally strong performance against major currencies, with the notable exception of commodity currencies."
"We remain bullish on the USD against funding currencies (JPY, CHF) although, admittedly, our forecast revisions reveal a less bullish outlook than previously expected, especially against the stubbornly strong JPY," the analysts said in a research report Wednesday.
They also expect the greenback to strengthen against European currencies, especially the euro, but said they have "revised the pace of expected EUR depreciation," with the currency "increasingly susceptible to downside risks."
