MW:Dollar edges lower as traders await Jackson Hole
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar drifted lower versus most major rivals Tuesday, finding modest pressure on expectations Federal Reserve Chairman Ben Bernanke will drop hints of easier monetary policy when he addresses a high-profile economic forum in Jackson Hole, Wyo., at the end of the week.
The ICE dollar index DXY -0.21% , which measures the U.S. unit against a basket of six major currencies, traded at 81.583, down from 81.696 in North American trade late Monday.
The WSJ Dollar Index XX:BUXX -0.24% , which tracks the dollar against a slightly larger basket, fell to 71.03 from a close of 71.14 on Monday.
Bernanke addresses the Kansas City Federal Reserve’s annual Jackson Hole symposium on Friday, where he will deliver a speech entitled “Monetary policy since the crisis.”
The title “may suggest that the bulk of the speech will be a bit more backward-looking than the market would like to see. But even if this is the case his comments might still influence the market,” said Steven Barrow, currency and fixed-income strategist at Standard Bank in London.
“If, for instance, he lauds the role that [quantitative easing] has played in the past, the market might take this as a sign that he, at least, is willing to do more — and as early as the September meeting,” Barrow said, in a note.
Barrow expects Bernanke’s remarks overall to leave the market “hopeful” about a potential policy response at the Fed’s September meeting, which would help keep U.S. Treasury yields on a downward path while allowing the euro to extend its recent rebound versus the dollar, potentially testing the $1.30 area in the next few weeks.
The euro EURUSD +0.38% fetched $1.2533 versus the dollar, up from $1.2500 on Monday.
Italy on Tuesday sold 750 million euros ($938.5 million) of inflation-indexed Treasury bonds, while Spain sold three- and six-month Treasury bills. Borrowing costs dropped in both sales compared with earlier auctions, reflecting a drop in yields that followed European Central Bank President Mario Draghi’s pledge last month that the bank would do everything within its mandate to preserve the euro.
The ECB on Tuesday said Draghi canceled a planned appearance in a Saturday panel discussion in Jackson Hole, citing a heavy workload.
The ECB is attempting to formulate a bond-buying plan that would aim to bring down borrowing costs for troubled governments that agree to go to the euro-zone rescue fund for help.
The British pound GBPUSD -0.01% traded at $1.5793, little changed from $1.5795.
The Australian dollar AUDUSD +0.01% fetched $1.0374 versus $1.0371.
The dollar bought 78.66 Japanese yen USDJPY -0.13% , down fromÂĄ78.78.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
