✂ Fed’s first rate cut since 2020: Use our free Stock Screener to find new opportunities fastExplore for FREE

FOREX-Dollar, yen pressured; moves limited ahead of Fed

Published 06/19/2009, 04:37 AM
Updated 06/19/2009, 04:56 AM
UBSN
-

* Euro up 0.1 percent at $1.3914

* Aussie dlr up 0.5 percent vs U.S. dollar

* BBA change for Libor may help dollar

* Moves capped ahead of U.S. Fed policy meet next week

By Tamawa Desai

LONDON, June 19 (Reuters) - The dollar and yen came under pressure on Friday as brighter U.S. economic data reinforced expectations for the global growth outlook, but moves were limited before a U.S. Federal Reserve policy meeting next week.

Higher-yielding currencies such as the Australian dollar gained, but investors were reviewing whether a recent rally in riskier assets was justified given the global economy was still struggling to emerge from its worst recession in decades.

"The leading indicator data aren't enough to start an upward trend," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ. "The markets needs to see more hard evidence to confirm the improvement that they expect."

The dollar and yen were weighed after data on Thursday showed the number of people on jobless benefits fell for the first time since January, while manufacturing in the U.S. Mid-Atlantic region contracted much less than expected in June.

A dearth of economic data on Friday meant position adjustments ahead of the weekend may dominate trade, dealers said.

At 0816 GMT, the euro was up 0.1 percent at $1.3920. But it stayed below Thursday's high of $1.4002 on trading platform EBS and below its 2009 peak of $1.4339.

The Australian dollar gained 0.5 percent to $0.837.

The dollar edged up 0.2 percent to 96.83 yen, holding firm after Wall Street gained the previous day to break a three-day losing streak and prompted traders to cover their yen long positions across the board.

The euro gained 0.3 percent against the yen to 134.80 yen while the Aussie dollar also rose 0.8 percent against the Japanese unit.

The yen had risen to multi-week highs against other currencies earlier this week as investors reduced riskier bets on higher-yielding units such as the Australian dollar.

The currency market also remained sensitive to bond yields.

Speculation that rates will rise on the back of an expected change to the London Interbank offered rate (Libor) may be a supportive factor for the dollar, some analysts said.

The British Bankers' Association said on Thursday it will change its definition of the Libor to allow a greater number of institutions to participate in the daily rate fixing process.

"The market appears to think that more banks mean a greater chance of higher fixings as banks which reported lower fixings to hide difficulties during times of stress would be less effective in distorting rates," said UBS in a research note.

"We think the knock-on from the BBA report is good news for the dollar. The simple way to look at it is from a perspective of interest rate differentials moving in favour of the dollar."

The other big focus for the market will be the U.S. Federal Open Market Committee meeting set for June 23-24.

Markets will watch whether the Fed will address a recent rise in short- and long-term interest rates. The Fed may extend its purchase of U.S. Treasuries but an aggressive expansion of buying is not likely.

Meanwhile, the Swiss franc remained under pressure after traders on Thursday cited Swiss franc selling against the euro on behalf of the Swiss National Bank, on which the central bank declined to comment.

The move came after the SNB said it would continue its ultra-easy monetary policy on Thursday, and renewed a pledge to take action in the currency market to keep the Swiss franc rising against the euro.

The euro was up 0.1 percent at 1.5124 francs after climbing as high as 1.5149 francs on EBS on Thursday. (Editing by Toby Chopra)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.