MW:Dollar slips vs. euro as investors await Bernanke
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar slipped versus the euro and posted a mixed performance versus other major rivals Thursday, with most major currency pairs holding tight ranges as investors remained focused on an eagerly-awaited speech by U.S. Federal Reserve Chairman Ben Bernanke.
The dollar index DXY +0.00% , which measures the greenback against a basket of six major rivals, edged up to 73.893, compared with 73.794 in North American trade late Wednesday.
The euro EURUSD -0.03% rose to $1.4463 versus the dollar, up from $1.4422 on Tuesday, while the British pound GBPUSD -0.12% fetched $1.6389, little changed from $1.6384.
The dollar traded at 77.02 Japanese yen USDJPY +0.19% , little changed from ¥77.01 late Tuesday.
“For the first time in what seems like months we have to say that the markets are a bit boring at the moment,” said Steve Barrow, currency and fixed-income strategist at Standard Bank in London. “It seems clear that markets are just idling, waiting for Bernanke’s speech on Friday, with volumes looking pretty low.”
Data on tap for Thursday include weekly U.S. jobless claims, with last week’s first-time filings expected to edge up to 410,000 from 408,000 the previous week.
But investors are largely waiting to see if Bernanke indicates the Fed is contemplating a third round of quantitative easing, or QE3, or other measures in an effort to stimulate the economy. Such a signal would likely be seen as dollar negative, strategists said.
Bernanke is scheduled to address an annual symposium on central banking in Jackson Hole, Wyo., on Friday.
Failure to signal another round of quantitative easing would likely spur a renewed round of risk aversion, said Markos Solomou, risk manager at Easy-Forex, in emailed comments. That could lead to a renewed drop by equity markets and a strengthening of the dollar on safe-haven flows.
If Bernanke does signal QE3, the dollar is likely to fall, with gold bouncing back to possibly break the $2,000 an ounce level in the near term, while stocks and energy commodities would also be likely to rise, Solomou said.
But Barrow questioned whether the Fed’s market-moving ability is as strong as generally perceived.
“Given the ineffectiveness of monetary policy right now, with rates stuck close to zero, Bernanke probably has a lot less power to move the markets over the long haul than we might think,” Barrow said. “Of course, it might not look like that on Friday afternoon as his comments could cause some sharp initial reactions.”
