Dollar Strengthens Amid Taper Expectations and Other Top Forex News.
The U.S. dollar moved higher against most of the major currencies on Tuesday as investors keenly await the conclusion of this weeks Federal Reserve policy meeting on Wednesday.
Investors are predicting the Fed will cut its asset purchase program by another $10 billion, to $75 billion per month, after data released this morning showed that U.S. consumer confidence was at a five-month high in January.
The Conference Board said its index of consumer confidence improved to 80.7 this month from a downwardly revised 77.5 in December. Analysts had expected the index to rise to 78.1.
It wasn’t all good news however, durable goods orders tumbled 4.3% last month the Commerce Department said, confounding expectations for a 1.8% gain. Core durable goods orders fell 1.6% in December, the largest drop since March, compared to forecasts for a 0.5% increase.
In Europe, expectations of the taper sent EUR/USD to a session low of 1.3629 before recovering slightly, finally closing down 0.10% at 1.3660.
In Asia, the yen weakened against the dollar for a second day as investors weighed U.S. durable-goods and consumer-confidence data against signs that turmoil in emerging markets is abating.
USD/JPY closed the session up 0.31% to 102.87, recovering from Monday’s seven week low of 101.76.
While the pound showed little reaction after preliminary data released on Tuesday showed that the U.K. economy grew 0.7% in the final three months of 2013, slightly down from growth of 0.8% in the previous quarter, and expanded 2.8% from a year earlier.
GBP/USD closed the session virtually unchanged, down 0.06% at 1.6574.
Elsewhere, the Australian dollar strengthened against the U.S. dollar after expectations for another rate cut by the Reserve Bank of Australia were abated after data showed that business conditions rose to a two-and-a-half year high in December.
The National Australia Bank said its monthly business conditions index rose to four in December from a reading of minus three in November, as low interest rates, higher house prices and a weaker exchange rate boosted sales and profitability.
AUD/USD closed the session up 0.38% at 0.8772, while the New Zealand dollar climbed higher as fears in emerging markets subsided. NZD/USD ended the session up 0.33% at 0.8260.
Finally, the Canadian dollar remained under pressure amid expectations that interest rates will remain on hold for some time yet. During the U.S. session the greenback climbed to a four-and-a-half year high against the Canadian dollar, with USD/CAD closing up 0.34% at 1.1154. More coverage of today’s session.
More coverage of today’s session.
- Barron’s: FOMC Likely to taper further at Bernanke’s last meeting. – One more time. Ben Bernanke chairs his last meeting of the Federal Open Market Committee, a two-day affair that winds up Wednesday. But unlike much of his eight, quite tumultuous years at the helm of the central bank, this confab should be mostly without drama.
- FT: U.K. economy in strongest annual growth since 2007, led by services. – Britain’s economic recovery moderated in the fourth quarter as the economy recorded growth of 0.7 per cent, although the figures confirmed that annual growth in 2013 was the strongest since 2007.
More Top Stories:
Dean Popplewell: Central banks bully Forex back in line. – It seems that the emerging markets are not sick enough for the rest of the world to be concerned about just yet. This appears to be the consensus view amongst analysts just as investors consider testing the waters again.
FT: Central bank fightback boosts currencies in emerging markets. – Emerging market currencies found support on Tuesday, with sentiment buoyed by bold action from central banks.
WSJ: Canadian dollar extends losses, hits lowest level since July 2009. – The Canadian dollar has resumed its decline Tuesday, hitting its lowest point since the summer of 2009, as worries about the health of emerging-market economies put selling pressure on the beleaguered currency.
WSJ: Australian dollar up as business conditions rebound. – The Australian dollar was higher on Tuesday on news of a rebound in business conditions in December weakening the case for another interest-rate cut.
WSJ: New Zealand dollar higher late as fears over emerging markets subside. – New Zealand–The New Zealand dollar was trading higher against the U.S. dollar late Tuesday as fears about emerging markets subsided and Asian markets stabilized.
Reuters: Gold prices edge lower as stock markets recover. – Gold prices eased on Tuesday, extending the previous session’s 1 percent drop, as global equities rebounded from their lowest in over a month and emerging markets stabilised after three days of intense selling.