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Dollar holds losses to euro after ECB comments, economic data

Dollar holds losses to euro after ECB comments, economic data

FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, January 21, 2016. REUTERS/Jason Lee

NEW YORK : The dollar held losses to the euro and British pound late on Thursday as currency traders digested moves in interest rate markets, comments by the European Central Bank President Christine Lagarde and a weaker-than-expected U.S. economic report.

The euro rose nearly 0.7per cent against the dollar and was headed for its biggest daily gain since May. It traded at US$1.1681 in the late afternoon in New York.

Sterling gained nearly 0.4per cent to US$1.3788.

The dollar index of major currencies lost nearly 0.6per cent to 93.3580.

Foreign exchange markets have become volatile around central bank activity. Bigger moves started on Wednesday with hawkish comments from the Bank of Canada and were followed on Thursday with an action by the Reserve Bank of Australia and comments by the ECB - all ahead of meetings next week of the U.S. Federal Reserve and the Bank of England.

"The market is very much triggered and sensitive to inflation worries and this notion that central banks are behind the curve," said Mazen Issa, senior currency strategist at TD Securities.

A contributing factor to the increasing volatility, Issa said, is the approaching end of the month when more investment managers rebalance their portfolios across currencies.

As central banks each chart adjustments to monetary policies adopted during the pandemic, traders are trying to predict the direction of interest rates and inflation-adjusted yields across currencies.

Some of the currency volatility is likely a spill over from uneasy interest rate markets. Recently flattening yield curves have suggested to some that central banks will have to sacrifice support for the pandemic recovery by allowing interest rates to rise to try to hold back inflation. Euro zone yields rose sharply on Thursday.

Before Lagarde spoke in a press conference, the euro moved little on the ECB policy statement. The ECB had stood, as expected, by its plan to keep buying bonds and hold down interest rates.

Some saw Lagarde's comments as not being as forceful in affirming the ECB's dovish position as markets expected.

"President Lagarde failed to give enough pushback against market expectations of rate hikes next year," Rabobank economists wrote in a note.

The dollar got no help from a U.S. government report that gross domestic product grew at only a 2per cent annualized rate in the quarter ended in September. Economists polled by Reuters had forecast a 2.7per cent rate.

More recent U.S. economic data has been stronger, so the report had not been expected to matter much to the dollar.

Though the British pound firmed against the dollar, it slipped against the euro as much as 0.3per cent.

The pound has been buffeted recently by speculation over whether the Bank of England would proceed with an interest rate hike at its meeting next week.

Early on Thursday, the Reserve Bank of Australia declined to buy a government bond at the heart of its stimulus program and the Aussie dollar fell in response to speculation the central bank will allow rates to rise earlier than expected.

The Aussie initially fell 0.5per cent after the RBA statement but soon erased those losses and was up 0.3per cent against the U.S. dollar at 1924 GMT.

In cryptocurrencies, bitcoin rose 3per cent to US$60,040.


Currency bid prices at 3:24PM (1924 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change


Dollar index

93.3580 93.8980 -0.56per cent 3.753per cent +93.9680 +93.2770


US$1.1681 US$1.1604 +0.67per cent -4.40per cent +US$1.1692 +US$1.1582


113.5500 113.8050 -0.22per cent +9.90per cent +113.8600 +113.2600


132.63 132.03 +0.45per cent +4.50per cent +132.6500 +131.5800


0.9119 0.9182 -0.69per cent +3.07per cent +0.9194 +0.9116


US$1.3788 US$1.3740 +0.36per cent +0.93per cent +US$1.3814 +US$1.3723


1.2343 1.2364 -0.15per cent -3.06per cent +1.2382 +1.2331


US$0.7540 US$0.7520 +0.28per cent -1.98per cent +US$0.7555 +US$0.7479


1.0652 1.0653 -0.01per cent -1.43per cent +1.0671 +1.0641


0.8469 0.8440 +0.34per cent -5.24per cent +0.8475 +0.8423


Dollar/Dollar US$0.7192 US$0.7171 +0.31per cent +0.17per cent +US$0.7216 +US$0.7153


8.3345 8.4215 -1.09per cent -3.00per cent +8.4410 +8.3180


9.7361 9.7693 -0.34per cent -6.98per cent +9.7977 +9.7108


8.5195 8.5845 -0.04per cent +3.94per cent +8.6046 +8.5176


9.9517 9.9555 -0.04per cent -1.24per cent +9.9855 +9.9520

(Reporting by David Henry in New York and Tommy Wilkes in London. Editing by Christina Fincher, Will Dunham, Barbara Lewis and Marguerita Choy)

Source: Reuters


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