ECB, Bank of England, Bank of Japan leave policies unchanged
By William L. Watts and V. Phani Kumar, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar fell Thursday as markets digested or awaited key central bank decisions, with the British pound pushing back above the $1.50 level after the Bank of England left monetary policy unchanged.
The ICE dollar index DXY -0.20% slipped to 82.411 from 82.490 in North America late Wednesday, reflecting the greenback’s broad weakness against a group of six major global currencies.
The WSJ dollar index XX:BUXX -0.21% , a measure of the currency’s performance against a slightly wider basket of rival units, slipped to 73.28 from Wednesday’s close at 73.47.
After swinging on both sides of the $1.50 level, the pound GBPUSD +0.1417% traded at $1.5052 after the Bank of England said policy makers left its asset-buying program unchanged and held its key lending rate at a record low 0.5%.
The bank’s rate decision was expected, though economists had acknowledged a likely close call on the question of whether to increase the size of the bank’s asset purchases, which are the centerpiece of its quantatitive-easing strategy.
The pound traded at $1.5032 in North American action late Wednesday. The pound fell as low as $1.4978 earlier Wednesday, a level it hasn’t seen since around June 2010.
The pound’s weakness followed a Financial Times report that U.K. Chancellor George Osborne will use his budget on March 20 to reinforce the message of “fiscal conservatism and monetary activism.”
Treasury officials are discussing proposals to change the bank’s remit with the arrival of Mark Carney as the central-bank governor in July. Options being considered include giving the BOE’s policy-setting committee greater time to bring inflation back to the 2% targeted level, in addition to expanding its mandate so it can target both employment and inflation, the report said.
“One factor that has weighed on sterling in recent months is the perception that a more ‘flexible’ BOE is poised to step on the monetary accelerator — perhaps putting the pedal to the metal when Mark Carney takes over as governor in July — just as the [U.S. Federal Reserve and the European Central Bank] apply the brakes,” said John Higgins, market economist at Capital Economics.
The euro, meanwhile, moved in narrow ranges. The ECB, as expected, left its key lending rate unchanged.
ECB President Mario Draghi is expected to face questions at his monthly news conference over the implications of Italy’s inconclusive election results on the central bank’s abiity to implement its bond-buying strategy.See: ECB policy unchanged; Draghi faces Italy questions.
The shared currency EURUSD +0.6016% was fetching $1.3021, compared with $1.2987. Against the Japanese unit, it EURJPY +1.1466% was trading at 122.85 yen versus ¥122.20.
The U.S. dollar USDJPY +0.5708% was buying ¥94.18, up from ¥94.08.
The yen’s moves followed the Bank of Japan’s decision earlier in the day to leave its interest rate and the size of the asset-purchase program at current levels. The meeting was the last one chaired by Gov. Masaaki Shirakawa before he and two of his deputies step down on March 19. Read more on the Bank of Japan’s decision.
Meanwhile, the Canadian dollar, or the loonie, inched up to recover some losses from the previous day, when it skidded after the Bank of Canada indicated plans to continue its own monetary-policy stimulus.
The dollar USDCAD -0.1162% was buying 1.0307 Canadian dollars, down from 1.0315 Canadian dollars.
Among other major pairs, the Australian dollar AUDUSD +0.1992% was trading at $1.0267, compared with $1.0236.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Follow him on Twitter @wlwatts.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.
