By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar made small gains versus rivals Wednesday, while the euro edged lower as traders proved reluctant to press the upside a day ahead of a crucial meeting of European Central Bank policy makers.
The ICE dollar index DXY +0.05% , a gauge of the U.S. unit against a basket of six major rivals, edged up to 81.432 from 81.327 in North American trade late Tuesday.
The WSJ dollar index XX:BUXX +0.08% , which measures the buck against a slightly larger basket, rose to 71.02 from Tuesday’s close of 70.93.
The euro EURUSD -0.13% traded at $1.2555, down slightly from $1.2568. The final reading of the August purchasing-managers’ index for the euro-zone services sector came in at 47.2, down from 47.9 in July and a preliminary reading of 47.5.
Combined with an earlier manufacturing PMI, the region’s composite PMI dropped to 46.3 from 46.5 in July and was below the preliminary estimate of 46.6.
“Services PMI prints were weak and showed contraction in activity across the board. This will probably increase the urgency for the ECB to act, but also provide justification for them to add to exigent extraordinary measures as some of the macroeconomic difficulties may be arising from blocked transmission mechanisms,” said Geoffrey Yu, currency strategist at UBS.
Draghi’s proposal
ECB President Mario Draghi last month broadly outlined a proposal that would see the ECB resume buying bonds in the secondary market, acting in concert with the euro-zone rescue fund to help bring down borrowing costs for countries that apply for help and agree to abide by strict policy conditions.
Draghi has maintained that action is justified and within the ECB’s mandate because fears that countries could leave the euro have pushed up borrowing costs in some countries, blocking the transmission of the ECB’s own monetary-policy measures.
Expectations are running high for Draghi to provide more details when he holds his monthly news conference after Thursday’s meeting of the ECB Governing Council.
The British pound GBPUSD +0.13% traded at $1.5890, up from $1.5877 late Tuesday. The dollar fetched 78.41 Japanese yen USDJPY -0.06% , little changed.
The Australian dollar AUDUSD -0.34% traded at $1.0188, down from $1.0223. Australia’s statistics agency said second-quarter gross domestic product expanded by 0.6%, falling short of forecasts for growth of 0.8%.
The U.S. dollar gained 0.2% versus its Canadian counterpart USDCAD +0.26% to 98.82 Canadian cents. The Bank of Canada is expected to leave its overnight rate unchanged at 1% on Wednesday.
The Canadian dollar will likely “continue to perform on the commodity currency-crosses if we are right in thinking the BOC retains the key phrase that ‘…some modest withdrawal of the present considerable monetary- policy stimulus may become appropriate..,’” wrote strategists at Royal Bank of Canada.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
