MW:Dollar hovers around 100-yen level, Aussie falls
By Barbara Kollmeyer and Saumya Vaishampayan, MarketWatch
NEW YORK (MarketWatch) -- The U.S. hovered around the 100-Japanese yen level on Tuesday, a day after the greenback fell below that level for the first time since early May.
The dollar USDJPY +0.71% changed hands at ¥100.09, up from ¥99.53 seen late Monday. But it touched ¥99.30 during the Asian session.
The dollar on Monday fell below ¥100 as the Institute of Supply Management reported that its U.S. manufacturing-sector index fell to 49.0% in May. Economists polled by MarketWatch had expected a reading of 51.0%.
Previously, the dollar hadn’t traded below ¥100 since May 9, according to FactSet data.
“While manufacturing activity is less important than services in terms of impact on overall output and employment, the ISM data could encourage investors to take bets on early Fed tapering off the table and add to the cyclical headwinds for USD across the board. The release could encourage further profit taking on stretched dollar longs with USDJPY looking top-heavy,” Valentin Marinov, a foreign-exchange strategist at Citi, wrote in a note.
The U.S. economic calendar for Tuesday is empty except for the April trade balance, but several Federal Reserve members will be speaking. Voting Fed members Gov. Sarah Bloom Raskin and Kansas City Fed President Esther George will speak, Bloom Raskin at 12:30 p.m. Eastern Time on the role of government in jobs creation, and George at 1:30 p.m. Eastern on the economy. Read: Spotlight on the economy
The British pound GBPUSD -0.08% fell to $1.5299 from $1.5313, and the euro EURUSD +0.15% inched higher against the U.S. unit, trading at $1.3087 compared with $1.3071.
The ICE dollar index DXY +0.03% , a gauge that measures the greenback’s performance against six other currencies, rose to 82.733 on Tuesday from Monday’s level at 82.687.
The WSJ Dollar Index XX:BUXX +0.26% , a rival measure that tracks the buck against a larger basket of currencies, rose to 74.46 from 74.31.
Aussie loses ground on rate-cut talk
Meanwhile, the Australian currency lost ground Tuesday after the country’s central bank indicated that future interest-rate cuts may be in store.
The Australian dollar AUDUSD -0.99% was trading below 97 U.S. cents after the Reserve Bank of Australia held its key interest rate at 2.75%. However, the central bank said “the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand.”
A lower benchmark interest rate could further hurt the Australian dollar, as rate reductions tend to depress debt yields in the currency.
The Aussie exchanged hands at 96.72 U.S. cents compared with 97.50 cents seen late Monday in North America.
The Aussie dollar on Monday surged about 1.8% against the U.S. dollar after data showed an unexpected contraction in U.S. manufacturing activity last month.
The “stance of monetary policy remained appropriate for the time being,” RBA Gov. Glenn Stevens said in Tuesday’s statement accompanying the central bank’s widely expected decision to keep the cash rate unchanged.
Stevens noted the Australian dollar has depreciated since the RBA’s meeting in early May, but he said the currency “remains high considering the decline in export prices that has taken place of the past year and a half.”
The Aussie fell below parity against the greenback in mid-May, shortly after a quarter-point interest-rate cut by the Reserve Bank of Australia to 2.75%. The central bank in May cited soft economic growth and a historically high level for the Australian dollar as among the reasons for the rate reduction, which defied expectations held by most economists.
“With the growth outlook looking more troubling and inflation not an issue, we see the possibility of more rate cuts, predicting another 25 [basis-point] move lower in the policy rate” in the third quarter, ING senior economist James Knightley told clients ahead of Tuesday’s RBA meeting.
“Furthermore, the RBA may consider that they can exploit current broad commodity forex weakness by executing further rate cuts, thereby pushing the Australian dollar below 95 U.S. cents,” Knightley said.
Slowing in China is among the concerns for the Australian economy, as China is Australia’s biggest trading partner. A report Monday from HSBC showed activity in China’s manufacturing sector contracted in May.
The Aussie earlier Tuesday rose to 97.48 U.S. cents after the government said the current-account deficit narrowed to 8.51 billion Australian dollars ($8.30 billion) in the March quarter on a seasonally adjusted basis. The deficit was A$14.759 billion in the December quarter.
That report came ahead of Australian economic-growth figures for the first quarter, due Wednesday from the Australian Bureau of Statistics. A FactSet survey shows economists expect, on average, growth of 0.7% from the fourth quarter of 2012.
