Previous session overview
The US dollar traded in tight ranges against its rivals Wednesday as investors resisted pushing the battered greenback too far in any direction during a session devoid of important U.S. economic data.
Currency markets also saw risk appetite reduced briefly Wednesday as U.S. equities declined. This prevented the higher-yielding dollar and euro from extending overnight gains on the low-yielding Japanese yen.
At the end of active trading Wednesday the dollar was modestly weaker against the euro and little changed against Japan's currency. Investors looked ahead to U.S. trade data out Thursday and an important report on U.S. retail sales out Friday that will shed more light on the state of the U.S. economy. The dollar remains only slightly off its all-time low against the euro, weighed down by Federal Reserve rate cuts last month amid signs of an economic slowdown.
Wednesday afternoon, the euro was at $1.4138 from $1.4097 late Tuesday, while the dollar was at Y117.24 from Y117.22. The euro was at Y165.77 from Y165.22. The U.K. pound was at $2.0408 from $2.0369, according to SWFX. The dollar was quoted at CHF1.1832 from CHF1.1838.
The best-performing currency Wednesday was the U.K. pound, which gained on the back of comments from Bank of England Governor Mervyn King late Tuesday, who hinted that rate cuts by the BOE to insulate the banking system are unlikely. King's comments helped push the U.K. pound to its highest level against the greenback since Oct. 1, at $2.0476. But it gave back some of those gains during the New York session. The pound also surged against the yen during overnight trading, pushing sterling above a key level of Y240.0 for the first time since Aug. 13.
That set the euro on track for some equally sharp gains against the yen, pushing the single currency above Y166.0 for the first time since late July.
But both the euro and sterling slipped against the yen during the New York session as the Dow Jones Industrial Average backed away from its all-time highs reached Tuesday.
Market expectation
Sideways trading may continue today, as traders focus on the key PPI and retail sales that will be released tomorrow. However, the reaction on the import price report might give us a hint about the likely reaction on the PPI.
The USD couldn’t gain anymore ground against the single currency as the view takes the upper hand that all is not well yet in the US and that EUR/USD will not be targeted at upcoming G7.
Dealers said the euro is still on its way to rise above its all-time high of $1.4283. But the upward momentum may not be strong enough until later next week as players are guarding against possible jawboning comments on the recent high euro prices from European officials.