MW: Dollar gains ground after dip in U.S. confidence
Chinese yuan set at third straight record high versus dollar
By Myra P. Saefong and William L. Watts, MarketWatch
SAN FRANCISCO (MarketWatch) — The dollar edged higher versus most major rivals Tuesday, finding support following a dip in March consumer confidence, 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 +0.14% , which measures the U.S. unit against a basket of major rivals, recently traded at 79.065, up from 78.896 in North American trade late Monday. The index traded around 79.034 before the confidence data, and had topped 79.100 shortly after the data were released.
The Conference Board reported Tuesday that a gauge of U.S. consumer confidence declined to 70.2 in March from a February reading of 71.6. Read more on consumer confidence.
Economists polled by MarketWatch had expected a reading of 71.5 for March.
“Although the index remains near a one-year high, the recent increase in gasoline prices has squeezed the pocketbooks of many Americans,” said Kathy Lien, director of currency research at GFT.
“The rise in equities has distorted the view of consumers who grew more optimistic about present situations but more pessimistic about future economic activity,” she said in a note. Disappointments in economic data “will only reinforce Bernanke’s desire continued accommodation and keep investors away from the U.S. dollar.”
The greenback had come 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.” Read more on Bernanke’s comments.
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.
Even so, “since the Chairman’s rhetoric stopped short of an unmistakable signal on the imminent introduction of additional quantitative easing, there is some room for debate on the absolute degree of shift in Fed policy,” said Todd Elmer, currency strategist at CitiFX, in a note Tuesday.
Against this backdrop, the yen USDJPY +0.42% weakened against the greenback, with the dollar fetching ÂĄ83.26 versus ÂĄ82.80. Read analysis of yen's looming day of reckoning.
The British pound GBPUSD -0.07% traded at $1.5974, from $1.5962.
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.
