LONDON—Emerging market currencies grabbed the focus Wednesday as major currencies held broadly steady ahead of big events later in the week.
The euro barely blinked against the dollar, despite data indicating the euro-zone economy shrank for the first time in more than two years. Word of a rescue plan in the offing for French-Belgian bank Dexia contributed to the euro's stability.
The pound got a boost from U.K. data showing growth in services outstripped expectations and dimmed the case for further monetary easing from the Bank of England. The currency hit a high for the session at $1.5477 against the dollar. For the most part, though, traders were holding steady before rate decisions Thursday from the BOE and the European Central Bank.
The euro was recently trading at $1.3363 compared with $1.3352 late Tuesday in New York. The dollar was at ¥76.68 compared with ¥76.81, while the euro was at ¥102.43 compared with ¥102.53. Meanwhile, the pound was trading at $1.5478 compared with $1.5476.
"Data releases don't tend to excite the market apart from the 10 minutes immediately after the release," said Daragh Maher, deputy head of global foreign exchange at Crédit Agricole. "The market today is in a holding pattern. People are reluctant to do much."
Emerging market currencies, however, showed strain from the nervousness that has characterized investor sentiment lately. Turkey's central bank announced a record target for its daily dollar-selling auction, at $1.35 billion, in a bid to stem the decline of the lira. The news sent the lira climbing, with the dollar falling by over 1.2% to a low for the day under 1.87 lira. But analysts questioned how long the Turkish authorities can keep this up.
"The country simply does not have big enough reserves to keep selling dollars at this kind of pace," said Neil Shearing at Capital Economics, noting that he expects the country to fall into recession over the next year.
Meanwhile, the scale of Russia's recent efforts to support the ruble became apparent as head of the central bank, Sergei Ignatyev, said the Bank of Russia sold $1.15 billion Tuesday. It also sold $8 billion during September.
The Hungarian forint tumbled as Fitch Ratings said the government's repayment program for mortgages in foreign currencies poses risks to the banking sector.
Still to come, the U.S. data docket includes the ADP private employment report, due at 1215 GMT, and the ISM non-manufacturing report at 1400 GMT.
