Loonie weaker ahead of Bank of Canada decision
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar held its ground versus most major rivals Wednesday, finding underlying support as data showed stronger-than-expected private-sector jobs growth in February while equity futures pointed to further gains for Wall Street a day after Dow industrials notched an all-time high.
“We would contend that the advance in global equities, led by the U.S., should provide a catalyst for ongoing dollar-buying interest, rather than recent slavish assumptions of a risk-on bias prompting the [dollar] to trade lower,” said Jeremy Stretch, currency strategist at CIBC World Markets in London.
The ICE dollar index DXY +0.15% , a measure of the U.S. currency against six major rivals, traded at 82.140 in early U.S. trading hours, up slightly from 82.078 in North American action late Tuesday.
The WSJ Dollar Index XX:BUXX +0.16% , which tracks the currency’s performance against a slightly wider basket, rose to 73.07 from Tuesday’s close of 72.98.
Stretch noted that the ICE dollar index failed to test the 82.50 level on Tuesday despite a stronger-than-expected reading from the Institute for Supply Management’s service-sector activity index.
That might be down to the “mass of event risk” over the next 48 hours, he said, which could have prompted investors to keep their powder dry.
On the data front, Automatic Data Processing Inc. on Wednesday said the economy added 198,000 private-sector jobs, topping forecasts for a gain of 175,000. See ADP: U.S. adds 198,000 private-sector jobs in February.
The Bank of Canada will conclude its monetary policy meeting later Wednesday, while the Bank of Japan, European Central Bank and Bank of England will make policy decisions on Thursday. Friday brings U.S. nonfarm payrolls and other employment data for February.
Wednesday also sees the release of the Federal Reserve’s so-called Beige Book.
The U.S. unit bought 1.0290 Canadian dollars USDCAD +0.0366% , up 0.3%.
Rates strategists at Royal Bank of Canada said there was a strong case for the central bank to remove its tightening bias with inflation running at the bottom of its 1% to 3% reference range and downside risks to its first-quarter forecast for gross domestic product to grow 2.3%.
The dropping of the tightening bias has already been factored into forward rates to some degree, said Adam Cole, currency strategist at Royal Bank of Canada.
The Canadian unit would react “more materially” if the bank instead opted to keep the phrase “some modest withdrawal of monetary policy stimulus will likely be required over time,” Cole said.
The euro EURUSD -0.1686% traded at $1.3023, down from $1.3044 on Tuesday. Against the Japanese currency, the euro bought ÂĄ121.83, up from ÂĄ121.68.
The dollar USDJPY +0.2712% traded at ÂĄ93.54 versus ÂĄ93.27.
The British pound GBPUSD -0.3214% fetched $1.5066, down from $1.5125 on Tuesday.
The Australian dollar AUDUSD +0.3171% traded at $1.0284, up from $1.0250.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Follow him on Twitter @wlwatts.
