By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — The euro moved in a tight range against the U.S. dollar ahead of a much-anticipated Spanish debt auction on Thursday, while the British pound declined amid expectations the Bank of England will leave its monetary policy unchanged.
The Australian dollar edged closer to parity with the U.S. dollar after employment data spurred investor risk appetite.
The ICE dollar index DXY +0.16% , which measures the greenback’s performance against a basket of six other major currencies, rose to 82.283 in East Asian trading Thursday afternoon, compared with 82.264 in North American trade late Wednesday.
The gains came ahead of Federal Reserve Chairman Ben Bernanke’s testimony before the Congress on the central bank’s economic outlook later in the day.
Late Wednesday, Janet Yellen, the Fed’s No. 2 official after Bernanke, said the central bank remains open to the idea of further monetary policy easing.
She said that further easing would follow if growth recovery was too sluggish, downside risks became “sufficiently great,” or if there was a threat of deflation. Read full story on Yellen’s remarks.
“A nod [from Bernanke] to further easing would underpin risk assets,” said Sue Trinh, senior currency strategist at RBC Capital Markets.
The euro EURUSD -0.24% was changing hands at $1.2562, little changed from $1.2561 in U.S. trading, with the common currency holding on to gains recorded the previous day.
The euro’s range-bound moves reflected caution ahead of a Spanish auction of 2-, 4- and 10-year securities later in the day.
Madrid is expected to raise just €1 billion to €2 billion from the auction, a relatively small issuance, but markets are closely watching the event after Spanish government officials recently bemoaned rising yields on its debt as a factor that was shutting the country out of the bond markets. Read full story on the Spanish bond auction.
“The odds are steadily increasing that Spain will ask for help in its banking recapitalization, but we also caution that the timeline may not be as imminent as some press reports suggest. The Spanish [finance minister] has said that they aren’t seeking immediate bank aid,” Trinh wrote to clients Thursday.
Meanwhile, the British pound GBPUSD -0.33% traded at $1.5473, down from $1.5486, on expectation that the BoE will leave its policy interest rate and size of monetary stimulus unchanged, despite pressure on the central bank to increase its asset-purchase program.
The U.S. dollar USDJPY +0.18% also extended gains against the Japanese currency, buying ÂĄ79.40 compared to ÂĄ79.17 in late Wednesday trading.
But the dollar lost further ground against the aussie, after data released earlier in the day showed the country created 38,900 additional jobs in May, even as the unemployment rate rose to 5.1% as more people began looking for a job. Read more about the employment data.
The Australian dollar AUDUSD +0.07% was buying 99.52 U.S. cents, up from 99.09 cents Wednesday and well above its 97.42-cent level on Tuesday.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
