Chinese yuan set at third straight record high versus dollar
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The dollar steadied versus major rivals Tuesday, consolidating a day after Federal Reserve Chairman Ben Bernanke appeared to signal that the central bank was in no hurry to exit its ultra-easy monetary policy.
The ICE dollar index DXY +0.10% , which measures the U.S. unit against a basket of major rivals, traded at 78.902, little changed from 78.896 in North American trade late Monday.
The British pound GBPUSD +0.11% traded at $1.5950, down from $1.5962.
The yen USDJPY +0.37% weakened, with the dollar fetching ÂĄ82.88 versus ÂĄ82.80.
The euro EURUSD -0.11% changed hands in recent action at $1.3352, down slightly from $1.3363 in choppy trading. The euro earlier pressed to a new March high above $1.3380 after an auction of Italian debt saw borrowing costs decline.
“The Italian auction results along with the [earlier] solid uptake in Spanish bonds show that credit fears have eased significantly in the region — a welcome sign to European fiscal authorities given the massive amount of financing coming up for the euro-zone peripheral economies over the next few months,” said Boris Schlossberg, director of currency research at GFT.
The dollar came under pressure Monday after Bernanke said it wasn’t certain that the recent pace of improvement in the nation’s labor markets could be sustained. He said further improvements could be supported by “continued accommodative policies.”
Easy monetary policy is seen as a negative for a nation’s currency. Bernanke’s remarks stoked ideas that the Fed is in no rush to exit ultra-easy policies and appeared to leave the door open to a further round of quantitative easing if conditions warrant, traders said.
Another take
Some strategists said market participants may be reading too much into Bernanke’s remarks.
“If the Fed truly believes that cyclically weak aggregate demand is behind the disappointing state of the labor market, then accommodation is necessary via countercyclical measures. Many of these are already in place and not once did Bernanke hint that additional measures would result in the acceleration of aggregate demand recovery,” said Geoffrey Yu, strategist at UBS.
The Fed’s policy actions will remain dependent on data, Yu said.
“Although the Fed is probably justified in remaining cautious and warning the market in holding off on its expectations…for normalization, ultimately this will need to be communicated at the right forums and prejudging upcoming FOMC decisions under the new communications framework is premature,” Yu said, in a note.
China’s yuan rose to a record against the U.S. dollar Tuesday, with the U.S. unit buying 6.284 yuan a day after Chinese President Hu Jintao told U.S. President Barack Obama that efforts to make the currency more freely tradable would continue. Read about yuan.
China’s central bank set the midpoint of the daily trading range for the dollar-yuan pair USDCNY -0.07% at a record high for a third session.
