MW: Dollar up as central bankers defend loose policies
Fed’s Bernanke, ECB’s Draghi, BOJ-designate Kuroda set dovish tone
By William L. Watts and V. Phani Kumar, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar managed a small rise versus most major rivals Thursday in the wake of signs that the world’s three most important central banks are content to keep loose monetary policy in place in an effort to keep growth on track.
The ICE dollar index DXY +0.0098% , which measures the greenback against six major global currencies, traded at 81.577 in recent action, compared with 81.552 in New York on Wednesday.
The WSJ dollar index XX:BUXX +0.07% , which captures the currency’s moves against a slightly wider basket of rival units, was at 72.54, barely budging from Wednesday’s close at 72.53.
“Today, Japan’s government nominated an uber-dove to be the next [Bank of Japan] governor, concern from the FOMC minutes that the Fed would start to withdraw stimulus was crushed by Ben Bernanke during his testimony to lawmakers Tuesday and Wednesday when he hinted QE3 isn’t going anywhere fast,” said Kathleen Brooks, research director at Forex.com in London.
“Even Mario Draghi from the ECB said [late Wednesday] that monetary policy will remain loose for some time,” she said in a note.
The prospect of a continued flow of liquidity from the world’s biggest central banks is overshadowing worries about political and economic policy gridlock in Italy following its inconclusive parliamentary elections and the impending round of automatic U.S. budget cuts, known as sequestration, set to take effect on Friday, Brooks said.
That, however, has helped make for a volatile but directionless trading pattern for major currencies, said strategists at RBC Capital Markets.
The euro EURUSD -0.1012% slipped to $1.3127, down a shade from $1.3136. Draghi, in a question-and-answer session after a speech in Munich late Wednesday, reportedly said the ECB is “far” from exiting its loose monetary-policy stance.
The dollar USDJPY +0.1361% traded at 92.22 yen from ÂĄ92.18 in North America late in New York on Wednesday. The euro EURJPY +0.0269% fetched ÂĄ121.04, little changed from the previous day..
The yen’s weaker undertone accompanied strong gains for Japanese equity markets during the session, and came as Bernanke affirmed his commitment to the U.S. monetary stimulus. Read more about Japanese stocks’ performance in Asia Markets..
Also aiding the yen’s weakness: The Japanese government on Thursday formally nominated Haruhiko Kuroda to be the Bank of Japan’s next governor, as was widely expected. The news kept alive hopes for monetary policies that could potentially weaken the yen further. Read full story on Japan’s nominations to the Bank of Japan.
The Australian dollar climbed, meanwhile, after data showed that local firms had lowered their capital-spending plans by less than expected in the last quarter of 2012. The currency AUDUSD +0.1499% traded at $1.0251, up from $1.0235 in the U.S. on Wednesday.
The data suggest that “mining investment is still set to rise further next financial year,” said Paul Bloxham, chief economist for Australia and New Zealand at HSBC, which expects that the Reserve Bank of Australia has reached the end of its interest-rate-reducing cycle.
The British pound GBPUSD +0.1755% traded at $1.5195 versus $1.5156.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Follow him on Twitter @wlwatts.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.
