The euro steadied against the dollar on Monday, drawing support from hopes the US Federal Reserve and the European Central Bank would soon take policy steps to revive their respective economies. The Australian dollar fell to fresh six-week lows against both the dollar and the yen as the market reacted in dismay to more signs of weakness in the Chinese economy and a set of weak Australian data.
The euro stood at $1.257 9, flat from late US levels and off an eight-week peak of $1.2638 set on Friday after Fed chief Ben Bernanke's speech fanned expectations of further stimulus to revive growth, dubbed as QE3 in market. Bernanke said high unemployment is "a grave concern" and that the Fed would act as needed to strengthen the recovery, though he did not explicitly signal an imminent move. "The Fed is fairly likely to introduce QE3 in its policy meeting this month," said Tohru Sasaki, the head of rates and FX research at J.P. Morgan Chase Bank in Tokyo.
While some market players think a strong reading at Friday's US payroll data could reduce such expectations, J.P. Morgan's Sasaki said the job data may not be so relevant this time. "The issue here is, after a loss of 8.78 million jobs (since the Great Financial Crisis), only about 4 million jobs have been recovered. A difference of tens of thousands in the upcoming payroll data would not mean much to them," said Tohru Sasaki, the head of rates and FX research at J.P. Morgan Chase Bank in Tokyo.
San Francisco Federal Reserve Bank President John Williams, known as a policy dove and a voter this year on Fed policy, also called for a round of bond purchases that could eventually top $600 billion. Expectations of a looser US monetary policy could support the euro in the run-up to the Fed's policy meeting on September 12-13, traders said.
The euro has been also underpinned by intense speculation that the ECB will soon unveil its strategy to tackle the euro zone's debt crisis, probably at its policy meeting on Thursday. ECB President Mario Draghi skipped the weekend's Jackson Hole retreat to try to smooth over a deep rift within the ECB over the bond scheme that is increasingly being played out in public.
Despite the differences within the bank, market players expect Draghi to eventually prevail. Reflecting such views, they have been cautiously trimming their pessimism on the euro over the past several weeks. The dollar was also under pressure against the yen following Bernanke's speech. It last stood at 7 8.29 y en, near the three-week low of 78.187 yen hit on Friday.
"The dollar may be supported by likely buying from Japanese importers in the near term. But I do think it will test 78 yen," said Takahiro Suzuki, vice president of forex at Nomura Securities. Part of the pressure also came from the Aussie/yen pair, with the Australian currency slumping to a six-week low of 80.12 yen, after it was hit by a double whammy of weak Chinese and domestic data. Against the US dollar, the Aussie slid to a low of $1.0240 , retreating from Friday's high of $1.0355 and extending its month-old downtrend while a resurgent euro hit a two-month high of A$1.2266 against the Aussie.
Comments
Comments are closed.