MW: Dollar up vs. euro, pound as ECB, BOE stay on hold
Australian dollar struggles near three-year lows
By Saumya Vaishampayan and Carla Mozee, MarketWatch
NEW YORK (MarketWatch) — The dollar rose against the euro and the British pound Thursday after the European Central Bank and the Bank of England kept their respective monetary policies on hold.
The euro EURUSD -0.5376% on Thursday fell to $1.3255 from $1.3332 on Wednesday. The British pound GBPUSD -0.3904% declined to $1.5195 from $1.5248.
The European Central Bank kept its key lending rate steady at 0.5% on Thursday. ECB President Mario Draghi said the central bank doesn’t see deflation in any euro-zone countries but dodged a question about an exit from recession. Read: Live blog of ECB President Mario Draghi’s news conference
The Bank of England also made no changes to its monetary policy on Thursday, maintaining its key lending rate at 0.5% and keeping its asset-purchases program unchanged at 375 billion pounds ($570 billion).
A continuation of easy monetary policies from central banks means the hunt for yield will go on, said Sebastien Galy, a senior currency strategist at Societe Generale, in a note before the ECB statement.
“The tendency will be to buy EUR/USD on [the] dip as investors continue to hunt for yield in Europe,” he said.
The lack of change in monetary policy from the ECB and BOE adds to a similarly steady statement from the Federal Reserve on Wednesday, in which there was no mention about when the Fed could begin to slow asset purchases. That puts more emphasis on Friday’s jobs report and the jobless rate for guidance on when such a tapering of bond buys could happen. Still, many believe the Fed is likely to be the first central bank to stem its monetary stimulus, which would be positive for the U.S. dollar.
The ICE dollar index DXY +0.58% , which tracks greenback’s movement against six rivals, rose to 82.00 from 81.464 late Wednesday in North America.
The WSJ Dollar Index XX:BUXX +0.77% , which measures the currency’s moves against a slightly wider basket, rose to 74.41 from 74.06.
The ICE dollar index on Wednesday fell to levels not seen since mid-June after the Fed slightly downgraded its economic outlook and offered no hint as to what’s next for its program of buying $85 billion a month in assets.
Before suffering its Fed-induced losses, the dollar had managed to head higher early Wednesday after U.S. gross domestic product for the second quarter grew at a faster-than-expected annualized pace of 1.7%, and as separate data showed the U.S. private sector added 200,000 in July.
Improving economic data can bolster the view that the Fed is moving closer to slowing the pace of asset purchases.
The monthly jobs report due Friday marks the last key piece of U.S. data for this week. Economists surveyed by MarketWatch expect nonfarm-payroll employment grew by 175,000 in July, which would be below June’s gain of 195,000.
For July, the ICE dollar index finished with a loss about 2%, the second consecutive monthly decline.
Economists had largely expected the Fed to pull back on the pace of purchases in September. The central bank’s quantitative easing measures have been seen as putting pressure on the value of the dollar.
Aussie, yen fall
The Australian dollar AUDUSD -0.6825% fell to 89.47 cents from 90.06 cents late Wednesday. The Aussie hadn’t traded below 90 cents since Aug. 31, 2010, according to FactSet.
HSBC’s final reading of Chinese manufacturing activity in July came in at an 11-month low of 47.7, matching a preliminary reading released last week. China is Australia’s largest export market. The HSBC report contrasted with China’s official version of the manufacturing PMI, which unexpectedly rose to 50.3 from June’s 50.1.
Meanwhile, the dollar USDJPY +1.4516% rose to ¥98.83 from Wednesday’s ¥97.79.
Saumya Vaishampayan is a MarketWatch reporter based in New York. You can find her on Twitter @saumvaish.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
