Reuters: US Dollar Report: FOREX-Dollar edges up on Fed "tapering" prospect, Aussie slides

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FOREX-Dollar edges up on Fed "tapering" prospect, Aussie slides Jul 30th 2013, 10:47 Tue Jul 30, 2013 6:47am EDT * Dollar index inches away from recent five-week low * Fed meeting in focus as ECB, BoE also meet this week * Aussie falls on RBA comment, weak GDP dents Swedish crown By Jessica Mortimer LONDON, July 30 (Reuters) - The dollar rose on Tuesday, recovering from recent falls, on caution that the U.S. Federal Reserve may lay the groundwork this week for curbing stimulus later in the year. The dollar index against a basket of currencies rose 0.1 percent at 81.756, above Monday's five-week low of 81.499 and chart support at 81.524, the 200-day moving average. The dollar retreated in recent weeks after Fed Chairman Ben Bernanke stressed ultra-easy monetary policy was still needed. But analysts said traders were wary of selling the dollar heavily due to expectations the Fed would scale back monetary stimulus in coming months. The U.S. central bank concludes a two-day policy meeting on Wednesday. "The market may have got ahead of itself in expecting a soft FOMC statement," said Arne Lohmann Rasmussen, head of currency research at Danske Bank in Copenhagen. The dollar has also been under selling pressure after a media report last week that the Fed may tweak forward guidance to stress that interest rates will stay low for a long time. Rasmussen said that if the Fed did this, the euro could rise towards $1.3350. However, he recommended using any falls in the dollar to buy it back. The euro was up 0.1 percent at $1.3273, just below Friday's five-week high of $1.32975 and helped by surveys showing improved euro zone economic confidence. Pledges to keep monetary policy loose are also likely after European Central Bank and Bank of England decisions on Thursday. Analysts at Barclays recommended reinitiating short euro/dollar positions, with a target of $1.28 and a stop at $1.3430. "The broader dollar strengthening trend remains very much alive." They said firmer U.S. data, including monthly jobs figures on Friday, could lead to a stronger dollar. But traders expected any dollar gains to be limited for now. "The market is looking to get through the FOMC, month-end and (U.S.) non-farm payrolls before a look back towards buying the dollar again," a London-based trader said. AUSSIE, SWEDISH CROWN FALL The Australian dollar slid more than 1.5 percent to as low as $0.9052 - just above a near three-year trough of $0.8998 hit in mid-July - after Reserve Bank of Australia Governor Glenn Stevens said the currency could fall further and there was room for more interest rate cuts. The Swedish crown also lost more than 1 percent against the euro after data showed the Swedish economy unexpectedly contracted during the second quarter. The euro hit a two-week high around 8.6870 crowns. Link this Share this Digg this Email Reprints

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