WSJ:Currency Markets Have That Friday Feeling After A Busy Week
By Jessica Mead
Calm prevailed in the currency markets during European hours Friday as traders paused for breath after a hectic fortnight and ahead of next week's busy schedule, which includes the Federal Open Market Committee meeting.
The dollar recovered some of the losses it suffered against the euro and sterling late Thursday after an article in The Wall Street Journal by Jon Hilsenrath suggested that the Federal Reserve is likely to push back on market expectations of a rate increase. The greenback did however remain under pressure against the Japanese yen in European trading hours.
The euro nudged down towards $1.33 against the dollar while the pound dropped towards $1.56 against the buck but overall, the ranges remained small as the light data calendar added to the lackluster trading environment.
"It's been quite a confusing week so we are taking a step back to look at the big picture," said Jane Foley, senior currency strategist at Rabobank. Earlier in the week the Bank of Japan disappointed hopes for additional stimulus, driving the yen higher, while the market's sensitivity to discussions about the Federal Reserve's commitment to ultra-easy monetary policy caused volatile moves in emerging market and commodity-linked currencies.
Ms. Foley added that participants are already looking ahead to the FOMC meeting next week, particularly since the Fed Chairman Ben Bernanke triggered widespread speculation across financial markets in May when he made remarks that the Fed would start to slow the pace of its asset purchases sooner rather than later.
The calmer tone in the major currencies, was mirrored in emerging markets, where many currencies continued to pullback from recent losses suffered.
The Turkish lira was also helped by the tentative compromise reached in the early hours of Friday morning between Turkey's Prime Minister Recep Tayyip Erdogan and representatives of antigovernment demonstrators. The lira continued to push higher against the dollar to trade at its strongest level since May 28, with the dollar falling to TRY1.8526.
The Hungarian forint and the Polish zloty also climbed against the euro, while the Czech koruna and the South African rand were broadly steady.
In the session ahead, U.S. data include May industrial production figures at 1315 GMT and the preliminary reading of the May Thomson Reuters/University of Michigan Survey of Consumers at 1355 GMT.
At 1031 GMT, the euro was trading at $1.3321 against the dollar, compared with $1.3378 late Thursday in New York, according to trading system EBS. The dollar was at Y94.86 against the yen, compared with Y95.35, while the euro was at Y126.39 compared with Y127.54. Meanwhile, the pound was trading at $1.5637 against the dollar, compared with $1.5721 late Thursday in New York.
The Wall Street Journal Dollar Index, which tracks the dollar against a basket of currencies, was trading at 72.659, compared with 72.545 late Thursday in New York.
A summary of key levels for chart-watching technical strategists is below:
