MW: Dollar down, euro edges higher as investors await Trichet
Aussie boosted by strong Australian jobs data, Chinese exports
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar lost ground versus most major rivals Thursday, while the beleaguered euro edged higher as investors awaited European Central Bank President Jean-Claude Trichet's monthly news conference for more details on the central bank's bond-buying program.
The dollar index (DXY 87.40, -0.50, -0.56%) , which tracks the U.S. unit against a basket of six major currencies, traded at 87.487, down from 87.911 in North American trade late Wednesday.
The Bank of England is widely expected to announce at 7 a.m. Eastern that its Monetary Policy Committee voted to leave its key lending rate at a record low 0.5% while leaving its 200 billion pound ($291.8 billion) asset-purchase program on hold.
The European Central Bank is expected to announce at 7:45 a.m. that its key rate remains at a record low 1%. The main event will be Trichet's news conference in Frankfurt at 8:30 a.m. Eastern.
"Some short squeeze ahead of the ECB and BOE meetings may be the theme ... in the wake of positive equities overnight," said strategists at UniCredit Bank in Milan. "However, we would still view any U.S. dollar, Swiss franc and Japanese yen slide with caution for now, as the global picture is still too uncertain to spark risk appetite."
The euro (CUR_EURUSD 1.2068, +0.0089, +0.7429%) rose to $1.2067 from $1.1982 on Tuesday. The single currency traded at ¥110.09 versus the yen , up from ¥109.24 on Wednesday.
Against the Swiss franc (CUR_EURCHF 1.3793, +0.0035, +0.2544%) , the euro traded at 1.3781 francs, up from 1.3765 francs on Wednesday.
The British pound (CUR_GBPUSD 1.4594, +0.0064, +0.4405%) changed hands at $1.4591 versus the dollar, up from $1.4526 on Wednesday.
A vote of confidence in the euro by the head of China's $114 billion national pension fund also helped boost the euro, analysts said.
"I think it is quite normal for the euro to be experiencing swings because of the European debt crisis," Dai Xianglong, chairman of the National Social Security Fund, said at a financial forum in the port city of Tianjin, Reuters reported. "I do believe the euro will gradually stabilize and survive the crisis."
The report said Dai was cautious about the U.S. dollar, saying the U.S. budget deficit "is still big, so there is a risk that the value of China's forex assets will contract."
Strategists said Trichet will be under pressure to provide more details of the ECB's bond-purchase program. The controversial plan was introduced after Trichet said on May 6 that the bank's Governing Council had not discussed the possibility of bond buys. Read more about Trichet.
"The ECB has slipped in the global rankings of most transparent central-bank rankings this year, and the inevitable loss of credibility over the last few months leaves President Trichet with a formidable challenge during his last year in charge," said Kenneth Broux, market economist at Lloyds TSB.
After a "rather stale" performance at last month's news conference in Portugal last month, "we look for a more commanding performance by Trichet at ECB headquarters" in Frankfurt," Broux said.
Dollar losses were most pronounced versus the Australian and New Zealand dollars.
The Aussie (CUR_AUDUSD 0.8418, +0.0147, +1.7773%) rose 1.7% versus the U.S. unit to 84.18 U.S. cents after the Australian government said the nation's jobless rate fell to 5.2% in May from 5.4% in April.
The U.S. dollar fell 1.5% versus the New Zealand dollar (C_NZD 1.50, -0.02, -1.30%) to trade at NZ$1.4691.
Chinese exports surged 48.5% in May from a year earlier, while imports rose 48.3%, the government reported Thursday. The rise wasn't unexpected given news reports Wednesday, citing leaked information, that said a strong jump was in the offing.
As expected, the New Zealand central bank on Thursday raised its key interest rate for the first time since the global financial crisis began in 2008.
The New Zealand Reserve Bank, citing a broadening recovery, hiked its official cash rate by 0.25 percentage point to 2.75%. Read about the New Zealand rate hike.
