Reuters: US Dollar Report: FOREX-Euro edges higher vs dollar ahead of Bernanke, ECB

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FOREX-Euro edges higher vs dollar ahead of Bernanke, ECB Aug 30th 2012, 14:22 Thu Aug 30, 2012 10:22am EDT * Market waits to see if Bernanke hints at more easing * Fed's Lockhart: 'close call' on whether more easing needed * China says willing to buy EU bonds, Italy sold debt smoothly By Wanfeng Zhou NEW YORK, Aug 30 (Reuters) - The euro edged higher against the dollar on Thursday as investors speculated on whether or not the Federal Reserve chief will signal further monetary easing and on hopes the European Central Bank will soon offer help to euro zone economies. Price action in currencies was limited as investors were reluctant to place big bets ahead of key event risks, including Fed Chairman Ben Bernanke's speech on Friday in Jackson Hole, Wyoming, a European Central Bank policy meeting next Thursday and the Fed's September policy meeting. "Obviously markets are speculating on whether or not there is going to be more stimulus coming from the Fed. Treasury yields are lower today so that indicates that they are expecting further action," said Eric Viloria, senior currency strategist at Forex.com in New York. But uncertainty is high. Investors and economists have become far more skeptical over the past two weeks that the Fed will announce a new round of bond purchases at its September meeting, according to Reuters polls over the last week. The sentiment was echoed in comments from Dennis Lockhart, the head of the Federal Reserve Bank of Atlanta, who said it will be a "close call" when policymakers meet next month to decide whether to ease policy more. He made the remarks in an interview with CNBC. "We don't think that Bernanke is going to commit to anything, rather just to reiterate his outline of what they can provide," Viloria said. "In the near term, if he doesn't say anything new, we could see some dollar strength." U.S. economic numbers over the last two weeks have largely come in a little better than forecast. Data on Thursday showed U.S. consumer spending rose by the most in five months, while the number of Americans filing new claims for jobless benefits was unchanged last week. Analysts said policymakers will also want to wait for August's jobs report, which is due out next Friday, just ahead of the Fed's next policy meeting on Sept. 12-13. Alan Ruskin, head of G10 FX strategy at Deutsche Bank in New York, said with the press replete with stories not to expect too much from Bernanke, "expectations look to have been set suitably low. "That suggests that the risk sell-off on Bernanke adding very little to the future QE outlook is likely to be very modest," he wrote to clients. The euro rose 0.2 percent to $1.2546, within sight of last week's high of $1.2589 set on Reuters data, which roughly coincides with its 100-day moving average. A rise above that level would mark the euro's strongest level in eight weeks. Italy sold all it wanted of a new 10-year bond at auction on Thursday, with yields well under 6 percent, helped by expectations that the European Central Bank will act soon to ease borrowing costs for weaker euro zone members. Adding to euro sentiment were comments from Premier Wen Jiabao that China is prepared to buy more EU government bonds, in the strongest sign of support for its biggest trading partner in months. The yen stayed within its recent range against the dollar, showing little reaction after Japan's opposition-controlled upper house passed a censure motion against Prime Minister Yoshihiko Noda the previous day. The dollar dipped 0.2 percent to 78.50 yen while the euro slipped 0.1 percent to 98.52 yen. The censure is non-binding but effectively means that Japan's opposition will stop cooperating with the government on most bills. Analysts said the political wrangling is unlikely to have too much impact on the yen, as ruling and opposition parties are likely to eventually hash out a compromise. Higher-yielding and commodity-linked currencies fell on concerns about a flagging Chinese economy, which would curb demand for commodities such as steel, iron ore and copper. The Australian dollar fell to a one-month low. It traded very close to its 200-day moving average at $1.0311 and technical analysts said a break below there could deepen its losses. The Australian dollar was last down 0.2 percent at $1.0329. Link this Share this Digg this Email Reprints

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