Weekly Forex Round-Up: Dollar Takes a Breath after Recent Gains

on Mar 15, 2013

The US dollar weakened against the euro (EUR) and the British pound (GBP) on Friday, March 15, slowing down at the end of a strong week in which it got support from upbeat US employment and retail sales data. The yen was steady against the greenback in early trading after Japan’s parliament endorsed the government’s nominees for Bank of Japan (BOJ) governor and two deputy governors.

The dollar fetched 96.11 yen in early trading on March 15, almost flat from late US levels on Thursday, newswires reported. The yen is on course for a 0.2 percent weekly loss against the greenback, which this week has been supported by positive US employment and retail sales data seen by markets as reducing pressure on the US Federal Reserve to maintain its quantitative easing programme.

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The yen was steady with the upper house of Japan’s parliament approving Haruhiko Kuroda as a BOJ governor and Kikuo Iwata and Hiroshi Nakaso as his two deputies. With the new BOJ leadership expected to step up monetary stimulus, analysts see the yen as remaining under pressure. Bloomberg quoted Mitul Kotecha, global head of foreign- exchange strategy at Credit Agricole SA (EPA:ACA),as noting that for now there was “probably still a further downside risk to the yen” and that there were expectations that the new BOJ leaders might try to “prove themselves as introducing more aggressive steps.”

The euro gained 0.1 percent against the dollar to trade at $1.3020 on March 15, off its three-month low of $1.2911 set on March 12. The single currency, which this week has been soft due to continued political uncertainty in Italy, was boosted by healthy demand at a Spanish government bond auction on March 14.
The euro is seen as remaining vulnerable with the Italian parliament scheduled to meet on March 15 for the first time after the inconclusive general election at the end of February. The results of the vote have been seen as potentially threatening the austerity efforts in of the Eurozone’s largest economies.

The British pound, which on March 12 slumped to a 33-month low against the dollar due to disappointing manufacturing data in the UK, rose the most in seven months on speculation that Qatar was planning to invest in infrastructure projects in Britain. Bloomberg reported that on March 14, the pound climbed to $1.5091 against the US dollar, advancing 1.2 percent, the steepest gain since July 26. On Friday, sterling was little changed at $1.5097.

Bloomberg quoted Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd, as commenting that the Qatar news was “causing the market to cut its short pound positions”. While the pound could potentially go to the $1.5150 area, it “still remains in an overall downward channel,” Jones said.
!m[Yen (JPY) Steady As Parliament Approves New BOJ Leader](/uploads/story/1638/thumbs/pic1_inline.png)
The Aussie (AUD) is on track for its strongest weekly gain in six months ahead of minutes of the Reserve Bank of Australia (RBA)’s last policy meeting scheduled to be released on March 19. Bloomberg reported that Australia’s dollar traded within 0.3 percent of the highest level against its US counterpart in more than five weeks. The Australian dollar received a boost on March 14 with surprisingly strong Australian employment data reducing the pressure on the RBA to cut borrowing rates. On Friday, the Aussie traded at $1.0371 against the greenback, down 0.1 percent from the previous day’s levels.
Bloomberg quoted Derek Mumford, a director at Rochford Capital, as pointing out that “the expectation of an RBA rate cut has been pared back quite substantially,” leading to a “huge bounce” in the Aussie. “I think the RBA is cautious of cutting too far, too soon,” he added.


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