Friday, 28 April 2017

Dollar index edges up, but poised for losing month

The dollar edged up in Asian trading on Friday but was on track for a losing month against a basket of currencies, while the euro shed some of its monthly gains after the European Central Bank maintained its easing bias.

The dollar index, which tracks the greenback against a basket of six major rivals, edged up 0.1 percent to 99.205, but down 0.8 percent for the week and 1.1 percent for April.

The euro was down 0.1 percent at $1.0863, but up 1.3 percent for the week and 2 percent for the month.

ECB chief Mario Draghi said on Thursday after the central bank's policy meeting that removal of the bank's easing bias was not discussed, stressing the barriers the ECB still faces before beginning to tighten its ultra-loose financing conditions.

However, he also said that euro zone's recovery was increasingly solid and downside risks had diminished.

"My feeling is that Draghi's statement will be an important factor to set the tone for the euro's movement next month," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo. "He said the ECB is unlikely to start its exit strategy this year."

Against its Japanese counterpart, the dollar inched 0.1 percent lower on the day to 111.30 yen, up 1.9 percent for the week but still down 0.2 percent for the month.

"The Japanese Golden Week holidays are ahead, and investors have already adjusted their positions," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

Tokyo markets will be closed for three days from May 3 for a string of holidays known as the Golden Week, and some market participants take additional time off.

"Because of the holidays, we're not seeing the usual Japanese profit-taking or exporter selling on the dollar's rise, though some investors are still hoping for a chance to buy the dollar on dips," Ogino said.

Liquidity is likely to be thin next week, which market participants say could exacerbate any sudden moves.

Traders continue to monitor tensions on the Korean peninsula, any escalations of which could give the perceived safe-haven yen a lift.

U.S. President Donald Trump told Reuters in an Oval Office interview on Thursday that a major conflict with North Korea is possible in the standoff over its nuclear and missile programs, but he would prefer a diplomatic outcome to the dispute.

On Thursday, the BOJ kept monetary policy unchanged as expected, but offered its most optimistic assessment of the economy in nine years, signaling its confidence that a pick-up in overseas demand will help sustain an export-driven recovery.

Japanese economic data released early in the session showed Japan's core consumer prices rose at a slower than expected pace in March from a year earlier, but they posted their third straight month of increase, driven by rising energy costs.

Later in the global session, investors will get a first look at the preliminary estimate for U.S. gross domestic product in the first quarter. Economists polled by Reuters expected an increase of 1.2 percent, and any downside surprise would likely pressure U.S. Treasury yields and the dollar.

The yield on benchmark 10-year Treasury notes stood at 2.292 percent in Asian trading, not far from its U.S. close of 2.296 percent on Thursday.

The dollar was steady against the Swedish crown at 8.8374 crowns per dollar, after it jumped on Thursday in the wake of a decision by Sweden's Riksbank extended its bond-buying. The central bank also predicted its first interest rate hike in mid-2018, later than previously projected.


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