MW: Dollar rises, euro falls as ECB hopes deteriorate
U.S. data show decline in jobless claims, narrowing of trade deficit
By Arti Patel and William L. Watts, MarketWatch
SAN FRANCISCO (MarketWatch) — The dollar furthered gains Thursday while the euro declined on diminishing hopes that the European Central Bank will take stringent action to benefit fledgling economies in the euro zone.
The dollar index DXY +0.47% , which measures the U.S. unit against a basket of six major rivals, rose to 82.665 compared to 82.366 late Wednesday.
The index extended gains after U.S. data showed a surprise decline in initial jobless claims for last week and a sharp narrowing of the nation’s trade deficit in June. Read the latest figures in the economic report.
The WSJ Dollar Index XX:BUXX +0.46% , which reflects the unit’s performance against top traded currency rivals, climbed to 71.77 from 71.44 on Tuesday.
The euro EURUSD -0.74% meanwhile, bought $1.2278, down over 0.7% from $1.2359 Wednesday.
“It seems as though all this hope about what the EBC can do is tapering off now,” said David Song, currency strategist for FXCM. “People are trying to figure out even if the ECB rolls out all these different potential measures or a big bazooka plan, will it really even help.”
ECB President Mario Draghi last week said the central bank was preparing plans that would potentially allow it to intervene in bond markets in concert with the region’s rescue funds. Such an effort, however, would require struggling governments like those in Italy and Spain to apply to the rescue funds for help and to agree to strict policy conditions.
Overnight data releases
Also Thursday, the dollar trated at 78.62 Japanese yen USDJPY +0.31% , up from ÂĄ78.46 late Wednesday. The Bank of Japan on Thursday left monetary policy and the size of its asset-purchase program unchanged. See: Bank of Japan stands pat but is open to more easing .
”There was an expectation of change because of those two new dovish board members voting this time around,” said Song. “The Bank of Japan has to do more to help the economy gather pace.”
The Australian dollar AUDUSD -0.06% got an early boost changing hands as high as $1.0613 thanks to better-than-expected July employment figures released overnight Wednesday.
The aussie has since slipped to trade at $1.0563, down slightly from $1.0566 late Wednesday.
“On the back of the recent string of positive economic surprises in Australian data and the very neutral tone in recent Reserve Bank of Australia statements, Citi economists now expect the RBA’s next move to be a hike rather than a cut,” wrote Citi G-10 strategist Andrew Cox in a note.
The RBA are “quite comfortable with the current stance of monetary policy and content waiting on the sidelines while they see how the 75bps of easing in recent months impacts the domestic economy,” Cox wrote.
A surprise, the Norwegian krone EURNOK +0.11% has outperformed all other Group of 10 currencies over the past five days, its performance enhanced by strong domestic data and higher oil prices.
The euro fetched 7.2832 kroner, up 0.17% from Wednesday, nearing its lowest level against the Norwegian unit since early in 2003.
According to Citi analysts, the Norges Bank previously cited the currency’s strength as a negative pressure on inflation and partly responsible for the rate cut earlier this year.
The British pound GBPUSD -0.28% is trading at $1.5622 versus $1.5652 late Wednesday.
Arti Patel is a MarketWatch reporter, based in San Francisco.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
