Dollar Slumps To 6-day Low Against Franc And 4-day Low Against Pound
Tuesday in Asia, the U.S. dollar edged down against its European, U.K. and Swiss counterparts as investors await the Federal Reserve Chairman Ben Bernanke’s testimony in the House and the Senate on Wednesday and Thursday. The dollar plummeted to a 6-day low against the franc and a 4-day low against the pound. But the dollar recovered slightly from a 5-day low against the yen.
As the Fed hiked the primary credit discount rate last week, economists’ expect Bernanke’s message is unlikely to be different from what the FOMC said in the January 27 policy statement. Bernanke is also expected to reiterate that the pace of economic recovery is likely to be moderate for a time and economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
San Francisco Federal Reserve Bank President Janet Yellen, who is not a voting member of the Fed’s monetary policy-setting committee this year, said yesterday that the U.S. economy still needed extraordinarily low interest rates, as inflation was “undesirably low” and growth was likely to be sluggish for several years.
During Asian deals on Tuesday, the dollar declined against the currencies of U.K. and Switzerland. Currently, the dollar is trading at a 6-day low of 1.0740 against the franc and a 4-day low of 1.5525 against the pound, compared to yesterday’s close of 1.0752 and 1.5488, respectively. If the dollar slides further, it may target 1.582 against the pound and 1.065 against the franc.
The dollar dropped against the euro in Asian deals on Tuesday. The euro-dollar pair that closed yesterday’s trading at 1.3601 is presently quoted at 1.362 with 1.366 seen as the next target level.
The dollar that slipped against the yen in early Tuesday Asian deals recovered after touching a 5-day low of 90.95 at 10:10 pm ET. At present, the dollar-yen pair is worth 91.07, compared to Monday’s close of 91.14.
The BoJ minutes released today likely influenced the yen. Members of the Bank of Japan’s monetary policy board felt that deflationary pressures are likely to continue for some time, minutes from the board’s meeting on January 25 and 26 showed.
At the meeting, the bank decided to leave its uncollateralized overnight call rate unchanged at 0.10% and held off on new policy initiatives. It also retained its assessment of the domestic economy.
The Swiss January UBS consumption indicator, French and the Italian CPI for January and the German IFO business climate index for February are expected to influence trading in the upcoming European session.
Across the Atlantic, the U.S. consumer confidence report and the Richmond Fed manufacturing index- both for February and the S&P/Case-Shiller home price index for December have been slated for release.
