MW: Dollar dips, euro gains on increased risk appetite
Boston Fed’s Rosengren urges open-ended bond buying
By William L. Watts and Arti Patel, MarketWatch
SAN FRANCISCO (MarketWatch) — The U.S. dollar slipped against other major currencies Tuesday as investors’ growing appetite for risk helped the euro extend gains.
The dollar index DXY -0.11% , which measures the U.S. unit’s performance against a basket of six major rivals, fell to 82.144 from 82.175 late Monday.
The WSJ Dollar Index, XX:BUXX -.00% which also gauges the greenback’s moves against a basket of other heavily traded currencies, eased to 71.36 from 71.40.
“Risk appetite is still there and it’s really coming from the European Central Bank board member comments saying they’re for purchasing bonds,” said David Song, currency analyst for FXCM.
The euro EURUSD +0.15% gained to $1.2425 from $1.2400 Monday.
EURUSD 1.2419, +0.0018, +0.1462%
DXY 82.19, -0.09, -0.11%
20%10%0%-10%-20%
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Mario Draghi, president of the European Central Bank signaled openness toward a bond-buying program in comments made last week, while opposition to the plan outside strict regulation was voiced by several German central bankers including Bundesbank chief Jens Weidmann.
“We’re seeing Weidmann and Draghi butt heads right now, but I’m thinking Draghi wins and asset purchases will happen,” said Song. “The Bundesbank is fighting an uphill battle.”
Remarks by Eric Rosengren, president of the Federal Reserve Bank of Boston, also came in for passing attention. He said the Federal Reserve should embark on an open-ended bond-buying program. Read more on Rosengren.
“Rosengren is the most dovish of all regional Fed presidents,” said Cox. “I do not think that his comments today will have a significant impact on the current debate at the Fed.”
Rosengren isn’t a voting member of the Federal Open Market Committee this year, but he will be in 2013.
Meanwhile, the Australian dollar AUDUSD -0.08% reversed earlier gains, trading at $1.0583 after the Reserve Bank of Australia’s decision to leave its key lending rate at 3.5%. The central bank cut the rate by a total of three-quarters of a percentage point in May and June.
The British pound GBPUSD +0.28% changed hands at $1.5653, up from $1.5615 on Monday. U.K. manufacturing output and industrial production data revealed steep declines in June, but they still came in smaller than forecast, leaving some potential for a slight upward revision to U.K. second-quarter gross domestic product, economists said.
The euro EURCHF +0.01% also traded at 1.2015 Swiss francs, up about 0.1% from Monday. The Swiss National Bank said its total foreign reserves grew by 41 million francs in June, giving it additional firepower to sell the shared currency and defend its 1.20 floor for the euro/Swiss franc cross, Lignos said.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
Arti Patel is a MarketWatch reporter, based in San Francisco.
