By Gina Lee
Investing.com – The dollar was up on Tuesday morning in Asia, with moves subdued ahead of Thursday’s European Central Bank (ECB)’s meeting.
Although ECB’s policy decision, to be handed down that day, is widely expected to remain unchanged, the focus will be on the bank’s inflation forecasts and whether there are concerns over the euro’s strength.
The U.S. Dollar Index, which tracks the greenback against a basket of other currencies, edged up 0.13% to 93.168 by 9:53 PM ET (2:53 AM GMT), with trades thinned by the Labor Day holiday.
The euro slipped from a two-year high, reached at the beginning of September, in the wake of ECB chief economist Philip Lane’s comments about the single currency’s level during the previous week.
Some investors were optimistic about the dollar’s prospects ahead of the meeting.
“The ECB could raise more concerns over a further appreciation in the euro and make some downward revisions to its inflation projections," which would flag easier policy, Commonwealth Bank of Australia (OTC:CMWAY) currency analyst Kim Mundy told Reuters.
“In our view, the dollar can lift further over the remainder of the week because of the possibility the ECB takes a sharper dovish turn,” Mundy added.
The USD/JPY pair inched up 0.03% to 106.28. Yoshihide Suga, the frontrunner to succeed incumbent Shinzo Abe as prime minister in leadership elections scheduled for the following week, hinted at snap elections. On the economic front, data released earlier in the day showed that Japan's GDP contracted 28.1% year-on-year during the second quarter, beating the 28.6% drop in forecasts prepared by Investing.com but far below the previous quarter’s 2.2% fall. But other indices, such as July's household spending year-on-year and the current account, missed their forecasts.
The AUD/USD pair inched up 0.08% to 0.7280 and the NZD/USD pair inched up 0.01% to 0.6691.
The USD/CNY pair inched up 0.06% to 6.8338. U.S.-China tensions continued to simmer after U.S. President Donald Trump told a White House news conference on Monday that he intends to curb the economic relationship between the two countries.
The GBP/USD pair edged down 0.16% to 1.3146. U.K. Prime Minister Boris Johnson is reportedly contemplating legislation to override the country’s Brexit withdrawal agreement with the European Union (EU). The news triggered an EU warning that there would be no deal if the U.K. went ahead with the move, increasing the prospects of a hard Brexit yet again. Fresh talks between the U.K and the EU will be held later in the day.
Some investors questioned the motives behind Johnson’s announcement.
“The key question for markets is whether the remarks are still mostly brinkmanship as negotiations near the finish line,” NAB economics director Tapas Strickland told Reuters.
“The mild market reaction suggests markets think so and still sniff a deal,” he added.