Krona slightly weaker as Sweden faces hung parliament
By MarketWatch
LONDON (MarketWatch) — The dollar fell versus most major currencies Monday, under pressure ahead of a meeting this week of Federal Reserve policy makers.
The dollar index (DXY 81.26, -0.15, -0.19%) , a measure of the U.S. unit against a basket of six major currencies, fell to 81.156 from 81.418 late Friday.
Overall activity in currencies was subdued amid a lack of major economic data in Europe and a public holiday in Japan, strategists said.
“This week will continue to be dominated by concerns about further Fed easing or stimulus at Tuesday’s Federal Reserve rate meeting,” said Michael Hewson, market analyst at CMC Markets.
This will be particularly so after the University of Michigan’s consumer-confidence index fell Friday to its lowest level in more than a year, he said.
The rate-setting Federal Open Market Committee isn’t expected to take action at its closed-door meeting Tuesday, but investors will be scouring the subsequent announcement for clues to the potential for a further round of quantitative easing against a backdrop suggesting a sputtering U.S. recovery.
The euro (EURUSD 1.3075, +0.0024, +0.1839%) traded at $1.3094, up slightly from $1.3044 in late New York trading on Friday. The single currency came under modest pressure at the end of last week as peripheral euro-zone government bond yields jumped when measured against safe-haven German bund yields and as the cost of insuring Irish government debt against default soared over renewed worries about the cost of bailing out Irish banks. Read more about Ireland.
Trendless euro action, in the $1.30 to $1.31 range, is likely to prevail ahead of the FOMC’s decision Tuesday, wrote strategists at UniCredit Bank in Milan. Currency traders will keep an eye out for auctions of Irish and Portuguese government debt scheduled this week.
From a technical standpoint, Hewson said the break through resistance last week at the $1.2920 to $1.2930 level maintains positive momentum for the single currency, for now, with a close below that level needed to reassert downside pressure and signal a test toward $1.2780.
Important resistance stands at the 200-day moving average at $1.3230, he said, marking a key barrier to a test of the August high near $1.3335.
The dollar traded at 85.62 yen (USDYEN 85.6900, -0.0400, -0.0467%) , down from ¥85.82.
Intervention by Japanese authorities last week to buy dollars and sell yen in an effort to halt the Japanese currency’s sharp gains gave the dollar a sharp boost versus the yen. The dollar had hit a new 15-year low versus the yen below ¥83 at midweek.
Investors remain reluctant to challenge the Bank of Japan on its efforts to impede the yen, wrote strategists at KBC Bank in Brussels.
Economic data have had hardly any impact on trading in the dollar against the yen, which has instead become a “tactical game” between Japanese authorities and the market, they said.
Also Monday, the Swedish krona was also stronger on the dollar (USDSEK 7.0167, -0.0550, -0.7775%) but was slightly weaker versus the euro.
Sunday elections in Sweden saw Prime Minister Fredrik Reinfeldt’s center-right Alliance coalition fall short of the parliamentary majority needed to form a new government. Read more about the Swedish election.
The British pound (GBPUSD 1.5596, -0.0057, -0.3642%) traded steady at $1.5615.
