The dollar made steady gains in early Asian trading but dropped back later in the session. Comments from St. Louis Fed President James Bullard on Monday that there’s more than a 50% chance that the Federal Reserve will raise rates in September lifted the dollar index to new 3-month highs.
The euro meanwhile was steady near 3-month lows against the dollar on the absence of any major data. The Greek debt crisis appears to have abated for now as Greece has repaid the instalments due to both the ECB and the IMF. There were also no reports of any panic after Greek banks reopened from a 3-three week closure.
The euro was mostly flat at 1.0823 dollars in late Asian session, but this is up from Tuesday’s low of 1.0808 dollars. The single currency was also steady against the pound at 0.6949. The dollar continued to climb against the yen, reaching 124.40 but came off 6-year highs against the loonie to drop to 1.2996.
The aussie stabilized against the dollar after the Reserve Bank of Australia’s meeting minutes pushed the currency lower earlier in the session. The minutes continued to call for further declines in the Australian dollar arguing that despite falling significantly against the US dollar, its decline has been more modest against a basket of currencies. As a result, RBA members noted that the exchange rate had a reduced impact on achieving balanced growth.
The aussie rebounded to 0.7357 from a low of 0.7340 against the greenback. While the kiwi shrugged aside rate cut expectations to rise to 0.6613 after New Zealand’s Prime Minister said that the kiwi has fallen faster-than-expected.
The Bank of Japan also released its minutes from its last monetary policy meeting. The minutes raised the prospect of further monetary stimulus as some members were doubtful if the current program was powerful enough to keep long-term interest rates at low levels, which recently temporarily rose to 0.5-0.6%.
Gold prices stabilised after Monday’s dramatic fall as it rose to around $1108.70 in late Asian session. Brent crude prices continued to come under pressure though on oversupply concerns and the strengthening dollar. Prices were weaker at $56.60 at the start of European trading.
Tuesday is expected to be another quiet day for economic data with only UK public sector net borrowing figures of any interest. Attention is likely to shift towards tomorrow’s Bank of England minutes and US home sales data.
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