Dollar Recovers Losses Before Weekend and Other Top Forex News.
The U.S. dollar recovered most of this week’s losses against the other majors on Friday, as Wednesday’s comments by Federal Reserve Chairman Ben Bernanke continued to weigh on the market.
The dollar was hit hard after Wednesday’s Fed minutes for June’s FOMC meeting showed that some members of the committee were still concerned about the health of the U.S. labour market, leading traders to reduce bets the dollar would rise as a consequence of tapering bond purchases.
But traders now think the correction went too far, a senior analyst at BNP Paribas told the FT. “With the Fed’s tapering timetable still in place and other G10 central banks, including the Bank of England, sending dovish messages and poised to ease further, the case for a U.S. dollar recovery remains sound.”
To emphasise the point, official data out of Europe today showed that industrial production in the eurozone fell 0.3% in May, exceeding expectations for a 0.2% downtick, after a 0.5% increase the previous month.
At the close of the U.S. session, EUR/USD was down 0.26% at 1.3061. GBP/USD was also down losing 0.54% at 1.5102. The greenback was also higher against the yen with USD/JPY adding 0.38% at 99.35.
But the biggest faller of the day was the Aussie, which fell 1.50% to 0.9052 after the Australian Bureau of Statistics said home loans increased by 1.8% in May, less than the 2.5% expected. The news strengthened expectations that the Reserve Bank will cut interest rates next month to a record low.
Traders are now anxiously awaiting Bernanke’s semi-annual testimony to Congress next week, especially given the volatility his comments have caused recently.
More Coverage of the Day’s Top Story
- Trading Floor: USD traders should note Bernanke testimony up next week. – Next week features U.S. Federal Reserve chairman Ben Bernanke’s final two-day, semi-annual testimony before Congress. The greenback will trade nervously until then, wondering if Bernanke’s remarks this week were over-interpreted.
- Marc Chandler: Dollar pares losses ahead of the weekend. – The U.S. dollar is firmer across the board, but within a consolidative phase after sharp losses over the past couple of sessions amid greater uncertainty over the timing of the Fed’s exit strategy from its exceptionally easy monetary policy.
More Top Stories:
Dean Popplewell: Bernanke’s remarks shouldn’t have come as a surprise. – “Helicopter” Ben’s remarks in the heart of the week have served to reassure investors that he and the Fed are in “no rush” to scale back their bond-purchasing program. The market took this as “new” news, in hindsight, it should not have been.
Trading Floor: A long week in FX drawing to a nervous close? – Very little news overnight as the market continues to attempt to digest the price action of the last 48 hours. What personally amazes me is that even in a quiet environment such as that of last night, every man and his dog is talking about how well the USD is performing. Really? Is it? It’s moved (at most) 0.2 percent higher in the last 24 hours. Is that what passes for performance and strength these days? If so, then I’m clearly missing something.
WSJ: Australian dollar drops near three-year low. – The Australian dollar fell to its lowest level in nearly three years as economic growth in China—a key trading partner of Australia—appears to be slowing down.
Bloomberg: Canada dollar falls from 3-week high on interest-rate difference. – The Canadian dollar fell from its strongest level in three weeks as U.S. debt maintained an interest-rate advantage over Canadian counterparts on that country’s stronger economic growth prospects.
New Zealand Herald: Dollar pares gain as Bernanke talk digested. – The New Zealand dollar gave up yesterday’s gains after traders decided comments by Federal Reserve chairman Ben Bernanke were not as dovish as initially thought and were more a reiteration of his previous stance.
Investing.com: GBP/USD remains lower after UoM report. – The pound remained lower against the U.S. dollar on Friday, after the release of disappointing U.S. consumer sentiment data, although Wednesday’s comments by Federal Reserve Chairman Ben Bernanke continued to weigh on the greenback.
Investing.com: EUR/USD drops on U.S. consumer data, European output report. – The dollar rose against the euro on Friday after U.S. consumer sentiment data and European industrial output missed expectations, which sparked safe-haven demand for the greenback.
Reuters: Dollar pares gains vs yen, euro after U.S. sentiment data. – The dollar pared gains versus the yen and the euro on Friday after data showed U.S. consumer sentiment waned slightly in early July.
Investing.com: Gold declines as market looks past Bernanke comments. – Gold prices fell on Friday after investors locked in gains stemming from Federal Reserve Chairman Ben Bernanke’s dovish comments made earlier this week and sold the commodity for profits.