Aussie continues run into record territory; yen weaker
By William L. Watts, MarketWatch
LONDON (MarketWatch) — The U.S. dollar recovered lost ground Monday, edging slightly higher versus the euro and trading flat against the Japanese yen as investors’ appetite for risky assets appeared to wane.
Overall activity was subdued, with investors awaiting this week’s meetings of key monetary-policy makers, including the European Central Bank, the Bank of England and the Reserve Bank of Australia.
“Risk currencies are benefiting from the renewed interest in the carry trade as currency markets begin to price in a shift in monetary policy across the” Group of 20, said Boris Schlossberg, director of currency research at GFT.
Risk appetite got a boost Friday from stronger-than-expected U.S. employment data, although the impact was tempered by remarks from Federal Reserve Bank of New York President William Dudley, who signaled that some Fed officials remain reluctant to begin unwinding the central bank’s accommodative bias just yet.
The dollar index (DXY 75.84, +0.00, +0.01%) , a measure of the U.S. currency against a basket of major rivals, slipped to 75.835 from 75.857 in North American trade late Friday. See real-time currency rates and tools.
The dollar (USDYEN 83.9700, -0.1700, -0.2020%) traded at 84.07 yen, virtually unchanged from Friday.
The euro (EURUSD 1.4223, -0.0007, -0.0492%) declined to $1.4211 from $1.4229 versus the dollar. The 17-nation shared currency traded at ¥119.51 against the yen, down 0.3%.
The euro put in a strong first-quarter performance, recovering from a January low below $1.3000 as ECB President Jean-Claude Trichet and other central-bank officials began highlighting inflationary threats. The ECB is widely expected on Thursday to deliver its first rate hike since 2008.
Some strategists contended the euro may be vulnerable to pressure as the ECB moves toward delivering a rate move.
“The euro has been strengthening on the ‘rumor’ of higher rates; it might start to fall on the ‘fact’ that rates have been hiked," said Steve Barrow, currency strategist at Standard Bank. “Much here depends on the tone of Trichet’s post-meeting comments. Much also depends on how soon the Fed starts to prepare the market for higher rates.”
Investors will continue to pay close attention to another round of speeches by Fed officials Monday, including an address by Federal Reserve Chairman Ben Bernanke at 7:15 p.m. Eastern.
Appetite for risky assets sent the Australian dollar to another post-float high above $1.0400 versus the U.S. unit Monday, GFT’s Schlossberg noted, but the Aussie was unable to hold on to the gain.
The Australian dollar (AUDUSD 1.0374, -0.0024, -0.2309%) changed hands at $1.0369 against the greenback in recent action, down 0.2% from Friday.
The Reserve Bank of Australia is expected to leave rates on hold when it meets Tuesday.
The British pound (GBPUSD 1.6151, +0.0036, +0.2235%) traded at $1.6135 versus the dollar, up from $1.6123.
Sterling received a boost after a purchasing managers index for the construction sector, compiled by Markit Economics and the Chartered Institute for Purchasing & Supply, came in at 56.4 in March, down marginally from 56.5 in February but above forecasts for a reading of 54.5.
A reading of more than 50 indicates growth in activity.
“The survey is consistent with a robust pace of growth in the construction sector, which appears to be broadly based as activity in the housing, commercial and civil-engineering sectors continued to grow at healthy rates,” said Blerina Uruci, economist at Barclays Capital.
