The dollar index fell to one-month lows on Wednesday as the US currency continues to be weighed by fading expectations of a summer rate hike by the Fed. The absence of any major data before the FOMC meeting next week is likely to keep the dollar muted.
The greenback dipped to a low of 106.71 yen earlier in Asian trading after Japanese GDP figures for the first quarter were revised up. But it later rebounded slightly to 107.09 yen in late session.
Japan’s GDP growth for the first quarter was revised higher from 0.4% quarter-on-quarter to 0.5%, in line with expectations. The focus now turns to the Bank of Japan and whether it will announce fresh stimulus measures when it meets next week, a day after the FOMC.
In other data out today, a smaller-than-expected decline in Chinese imports lifted sentiment across Asia, raising hopes that domestic demand in China is recovering. Imports fell by -0.4% year-on-year in May, an improvement on the 10.9% decline seen in the previous month and above estimates of a 6.0% drop. However, exports fell by more than expected and were down by 4.1% year-on-year in May, missing estimates of a 3.6% drop. The yuan firmed slightly against the dollar on Wednesday and last stood at 6.57 per dollar.
The euro edged higher against both the dollar and the pound in today’s Asian session after being boosted yesterday by an upward revision to Eurozone GDP growth in the first quarter. The single currency was last trading at 1.1370 against the dollar and at 0.7815 against the pound.
Sterling held on to yesterday’s gains and was supported by two more polls on Tuesday that pointed to a narrow lead for the ‘remain’ camp in the UK’s upcoming EU referendum. The pound was steady around 1.4535 dollars in late Asian trading.
Commodity currencies continued to benefit from stronger commodity prices as US crude held above $50 a barrel today. Oil prices were supported yesterday by a larger-than-expected drawdown in US crude stocks, according to the American Petroleum Institute.
The Australian dollar set another one month high against the greenback at 0.7464, while the Canadian dollar hit a fresh 5-week high of 1.2724 per US dollar. Meanwhile, the New Zealand dollar headed higher to test the 0.70 level despite some speculation that the Reserve Bank of New Zealand may cut rates at its policy meeting tomorrow.
Looking ahead to the rest of the day, UK manufacturing and industrial output data will be the only major data of the day, along with weekly crude oil inventories from the US Energy Department.