By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — The dollar on Friday took a breather, following recent gains in the wake of downbeat data and concerns about the pace of the Federal Reserve’s asset purchases, with the Australian currency climbing as the central bank chief signaled a pause.
The ICE dollar index DXY -0.05% , which measures the greenback’s moves against six major global currencies, slipped to 81.267 from 81.377 in North America late on Thursday.
The WSJ dollar index XX:BUXX -0.13% , a separate index capturing the currency’s moves against a slightly wider basket of rival units, fell to 72.39 from 72.49.
The euro EURUSD +0.24% , which slid under the $1.32-handle for the first time since Jan. 10 on Thursday, retraced its path and was fetching $1.3211, versus $1.3187 in New York.
“Ahead today, all eyes will be on the ECB, which will announce the amount of LTRO repayment banks intend to make next week,” said Michael Turner, a fixed-income and currency strategist at RBC Capital Markets.
LTRO, or long-term refinancing operations, refers to the funding euro-zone banks have received from the European Central Bank in the past, with markets keenly watching figures related to the repayment of those loans.
“Markets seem likely to interpret a low number as indicative of difficult funding conditions for non-core institutions, and probably sell euro,” Turner added.
Investors were also expected to be cautious ahead of the Italian general elections starting this weekend. Read Matthew Lynn’s column: Watch out, Berlusconi could crash the markets.
The Japanese currency also weakened, with the dollar USDJPY +0.18% purchasing 93.28 yen as compared with ÂĄ93.11. The dollar has risen about 7.6% over the yen in 2013 to date, helped by expectations of Japanese monetary easing.
“Prospects for further JPY weakening depend on whether the Bank of Japan loosens policies more than priced in, and the global economy recovers,” BofA Merrill Lynch analysts wrote in a note to clients.
“Short-term JPY moves may be more two-way compared with the past few months. In the long-term, we are JPY bearish, as Japan’s unsustainable government debt dynamics and adverse demographics make inflation the main policy option,” they added.
Among other major currency pairs, the British pound GBPUSD +0.10% was fetching $1.5285, as compared with $1.5245.
The Australian dollar AUDUSD +0.52% was among the day’s strongest performers, jumping to $1.0311 from $1.0235 after Reserve Bank of Australia Gov. Glenn Stevens said, in a testimony to a parliamentary committee on Friday, that interest rates were at an “appropriate” level for now.
He said more time was needed for the central bank’s previous interest-rate reductions to work their way through the economy. Read full story on Glenn Stevens’s remarks..
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.
