Dollar Weakens In Nervous Market Ahead of Fed and Other Top Forex News.
The U.S. dollar was broadly weaker against most major currencies on Tuesday after Chicago’s national activity index for July came in much lower than expected at -0.15 from a revised -0.23 in June, analysts had been expecting a figure of -0.10.
The news dashed the expectations of some traders, who thought the economic recovery was strong enough for the Fed to begin tapering back the amount of bond purchases it makes next month.
Traders are now anxiously awaiting tomorrow’s FOMC minutes for further guidance. But the general consensus seems to be that the Fed won’t start to unwind its asset purchase program until December.
Meanwhile, the euro remained in demand after last week’s data showed that the eurozone economy returned to growth in the second quarter, emerging from an 18-month recession.
During the U.S. session, EUR/USD advanced 0.62% to 1.3418.
The pound also found support, after last week’s jobs data soundly beat expectations. The dollar ended the session close to two-month lows against the pound.
GBP/USD climbed 0.16% to 1.5674.
In Asia the yen strengthened as investors avoided the dollar ahead of the Fed minutes.
USD/JPY fell 0.37% to 97.35.
However, the greenback wasn’t the only currency to come under fire, the commodities currencies were also hit after the Reserve Bank of Australia’s August meeting indicated that further rate cuts remain possible in the future.
AUD/USD closed the U.S. session down 0.26% to 0.9090
The New Zealand dollar fell sharply after Reserve Bank of New Zealand Governor Graeme Wheeler called the currency “overvalued“.
NZD/USD fell 1.03% to 0.7984
And the Canadian dollar fell for the third straight day after data showed Canadian wholesale sales dropped in June, with declines in every major category.
USD/CAD climbed 0.40% to 1.0387
More Coverage of Today’s Top Story
- The Australian: Aussie dollar falls as RBA won’t rule out another rate cut. – The Australian dollar has neared a two-week low after the RBA said there was the possibility of a further cut in interest rates, but added nothing imminent was planned.
- Bloomberg: Canada dollar falls versus most peers after RBA signals rate cut. – The Canadian dollar fell against the majority of its most-traded peers as the central banks of its commodity exporting peers, Australia and New Zealand, signaled steps could be taken to lower the value of their currencies.
More Top Stories:
Marc Chandler: Europe main beneficiary of flows from emerging markets. – The U.S. dollar stands at the fulcrum. Investment flows are leaving emerging markets, with currencies from Brazil,India,Indonesia and Mexico being hit the hardest over the last few sessions. The MSCI Emerging Market Index is off 4.5% over the past five sessions and the rout continues.
Dean Popplewell: Forex has a number of events to watch for in 2H. – Monthly U.S. NFP reports, Japanese inflation and Consumer Price Index updates, and European bond sales will continue to affect the currency markets for the balance of the year.
WSJ: Pimco executive sees Aussie dollar falling to 80 U.S. cents within a year. – The Australian dollar could fall as low as 80 U.S. cents over the coming year as the nation’s central bank is forced to cut interest rates to stoke growth, according to a top executive at Pacific Investment Management Co., which manages the world’s largest bond fund.
WSJ: New Zealand dollar down late; Governor calls currency overvalued. – New Zealand–The New Zealand dollar is trading sharply lower late Tuesday after the Reserve Bank of New Zealand Gov. Graeme Wheeler described the currency as “overvalued” in a speech on restrictions to high-risk lending.
MarketWatch: Gold gains on Asian demand prospects. – Gold futures traded higher Tuesday, with investors encouraged by the prospects for seasonal demand from Asia as the market awaited this week’s release of the latest U.S. Federal Reserve policy-meeting minutes.
Investing.com: USD/JPY falls as market awaits fresh cues from Federal Reserve. – The dollar fell against the yen on Tuesday as investors avoided the greenback on the day before the release of the Federal Reserve’s minutes from its July policy meeting.