By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) -- The U.S. dollar declined against the euro but recovered after hitting a fresh 15-year low against the yen on Monday, as expectations that the Federal Reserve will introduce more monetary stimulus continued to dominate foreign exchange markets.
Friday’s soft jobs data reinforced expectations that the Fed will step in again to shore up the U.S. economy.
“It is the U.S. dollar that is in the spotlight, and rightfully so with the Fed on the cusp of embarking on more quantitative easing,” wrote HSBC currency strategists in a note out Monday.
“The market is re-adjusting to a more U.S. dollar-negative view,” they noted.
The dollar index (DXY 77.11, -0.22, -0.28%) , a measure of the U.S. unit against a basket of six major currencies traded at 77.18, down from Friday’s 77.295 close.
The euro (EURUSD 1.3968, -0.0029, -0.2072%) traded higher against the dollar, at $1.397. The common currency ended Friday’s session at $1.3923.8
Against the yen (USDYEN 81.9300, +0.1800, +0.2202%) , the dollar fell to a fresh 15-year low of ¥81.40 earlier on Monday, before recovering. More recently, the greenback traded at ¥81.96, after closing at ¥82.05 on Friday.
The Bank of Japan has tried to stem the rise of the yen against the dollar by intervening in the currency markets. Meanwhile, the Governor of the Reserve Bank of India said on the weekend that India will intervene in the foreign exchange markets, if necessary.
Widening divergence between currency regions has led to talk of “currency wars” of late.
“Tensions are likely to increase as the world’s exporters compete for trade within an environment of declining global demand, hence currencies are now on the agenda of the major meetings of policy makers,” wrote currency strategists at BNP Paribas.
Over the weekend the International Monetary Fund’s governing body said that the IMF should move to “deepen its role” on currencies although it stopped well short of any move to limit currency movements.
The British pound (GBPUSD 1.5929, -0.0031, -0.1942%) traded at $1.5947, a touch weaker from Friday’s $1.5957 close.
“We are getting a little concerned about a few aspects regarding the U.K. economy. While the market is currently fixated with the idea that the Fed may adopt more [quantitative easing], the risks are rising that the Bank of England may do the same,” wrote the HSBC strategists.
