Falling iron-ore prices keep Aussie under pressure
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar drifted slightly lower in generally directionless trade Thursday, as market participants awaited weekly data on jobless claims a day ahead of an eagerly awaited speech by Federal Reserve Chairman Ben Bernanke.
The ICE dollar index DXY -0.06% , a measure of the U.S. unit against a basket of six major rivals, fell to 81.500 from 81.551 in North American trade late Wednesday.
The WSJ dollar index XX:BUXX -0.05% , which uses a slightly larger basket, slipped to 71.02 from Wednesday’s close of 71.05.
The dollar “is broadly, though only moderately, softer overnight. With no significant news driving this, month-end-related flow may be beginning to weigh,” said Adam Cole, head of G-10 FX strategy at Royal Bank of Canada in London.
Rising U.S. equity prices raise the value of foreign investors’ U.S. equity holdings, leaving a requirement to sell the dollar forward for hedging purposes, Cole said in a note.
Weekly U.S. jobless-claims data are set for release at 8:30 a.m. Eastern. Economists surveyed by MarketWatch forecast that first-time claims fell to 370,000 in the week ended Aug. 24 versus 372,000 a week earlier.
Data on personal income and consumer spending for July are also due at 8:30 a.m.
Bernanke will deliver a speech at the Kansas City Federal Reserve Bank’s annual economic symposium in Jackson Hole, Wyo., on Friday. Strategists said that expectations that Bernanke will use the occasion to signal a further round of monetary stimulus are fading.
The euro EURUSD +0.0948% edged up to $1.2541 from $1.2531.
The European Commission’s economic-sentiment indicator for the euro zone fell more than expected, to a nearly three-year low. But the euro was buoyed by a strongly received auction of Italian debt. Read: Borrowing costs drop at Italian bond auction.
The British pound GBPUSD +0.1124% bought $1.5838, little changed from $1.5834.
The dollar fetched 78.63 Japanese yen USDJPY -0.1010% , down from ÂĄ78.68.
The Australian dollar AUDUSD -0.1833% slipped to $1.0331 versus its U.S. counterpart, down from $1.0356.
Market focus “remains on the Australian dollar, which had another difficult session overnight, as press coverage of the continuing decline in iron-ore prices turned increasingly pessimistic. Even a stronger-than-expected capital- expenditure report for Q2 failed to offer any significant support,” said Chris Walker, strategist at UBS.
The price for spot iron ore, a key Australian export, has tumbled by 37% in just under six months to around $90.30 a ton.
The drop had accelerated in recent weeks, with analysts tying the drop to slower Chinese steel production and better Australian weather, which extended the iron-ore production period into the monsoon season. See The Tell blog: Iron-ore prices slammed again.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
