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Dollar eases as risk rally cools; Kiwi and aussie steadier

Published 07/22/2016, 05:53 AM
Updated 02/07/2024, 09:30 AM
The US dollar remained not too far from yesterday’s lows when it slid following reports that the Bank of Japan governor has ruled out helicopter money to ease Japan’s economic woes. Speculation that the Bank of Japan would engage in helicopter money had sent the yen lower in recent days and yesterday’s denial dampened expectations of any drastic measures being announced at the Bank’s policy meeting next week.

The news also put a halt to the risk rally that had led to a sharp rebound in global equity prices. The Dow Jones in the US snapped a run of 9 straight sessions of closing at record highs yesterday, while the dollar pulled away from a six-week high of 107.48 yen. The greenback was trading near Thursday’s lows in Asian trading today at around 105.90 yen.

An improvement in Japan’s manufacturing PMI reading for July provided additional support to the yen today. Manufacturing activity in Japan according to the Markit/Nikkei PMI contacted for the 5th consecutive month in July but the pace of contraction eased from 48.1 to 49.0 in July’s flash reading.

The Australian and New Zealand dollars were steadier today after posting significant losses in recent days on rising expectations that the RBA and RBNZ will likely cut interest rates at their policy meetings in August.

The aussie attempted to reclaim the 0.75 level against the US dollar in Asian trading today but was back down at 0.7475 in late session. The New Zealand dollar firmed slightly from yesterday’s two-week low but was unable to hold above the 0.70 handle and was trading just below the level in late Asian session.

The RBNZ strongly signalled yesterday that further policy easing is required to meet its inflation target, while the focus for the aussie are next week’s quarterly inflation figures.

The euro briefly fell below 1.10 dollars yesterday after traders had a mixed response to Mario Draghi’s press conference following the ECB’s July policy meeting. The ECB maintained its easing bias but most analysts were expecting Draghi to sound more worried over the impact of Brexit on the Eurozone economy. The euro had settled around 1.1020 dollars in Asian trading today.

Sterling recovered back above 1.32 dollars today after dipping to 1.3154 dollars yesterday from weaker-than-expected retail sales figures for June. All eyes will now be on one-off flash PMI readings for the UK out later today, which will provide the first detailed glimpse of the Brexit impact on the UK economy. The pound was last trading at 1.3230 dollars.

Coming up later today, UK and Eurozone flash PMIs will be watched in the European session, while in the North American session, Canadian inflation and retail sales figures, as well as US manufacturing PMI will attract some attention.

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