Reuters: US Dollar Report: FOREX-Dollar slips after dovish Fed, Aussie slugged ahead of China data

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FOREX-Dollar slips after dovish Fed, Aussie slugged ahead of China data Aug 1st 2013, 00:13 Wed Jul 31, 2013 8:13pm EDT * Dollar softer after Fed gives no stimulus exit details * Aussie plumbs 3-year lows ahead of China PMI data * ECB, BoE meetings expected to keep forward guidance on rates By Ian Chua SYDNEY, Aug 1 (Reuters) - The U.S. dollar wallowed at six-week lows against a basket of major currencies on Thursday, having slipped overnight after the Federal Reserve gave no fresh hint that it was preparing to scale back stimulus at its next meeting in September. The Fed said it would keep buying $85 billion in mortgage and Treasury securities per month and noted the potential dangers of inflation running too low, a dovish tone that disappointed dollar bulls looking to the U.S. central bank's easy money stimulus to wind down soon. Many economists expect the Fed would begin slowing its asset-buying programme as early as next month, especially in light of data showing U.S. economic growth was not quite as weak as expected in the second quarter. "The Fed sounded a bit more dovish on the economy... just enough to keep the dollar from going too far on the back of stronger data. In fact, you saw yields in the U.S. go lower overnight. That leaves us still waiting for other major central banks," said Greg Gibbs, senior strategist at RBS in Singapore. The dollar index, which tracks the greenback's performance against a basket of major currencies, last stood at 81.654 , having fallen 0.2 percent on Wednesday. The euro reached a six-week high around $1.3345 overnight, while the dollar dipped to a one-month low of 97.585 yen. The common currency has since eased back to $1.3304 with investors wary of getting too carried away ahead of the outcome of policy meetings at the European Central Bank and Bank of England later on Thursday. The ECB is expected to hold off further stimulus but is seen standing by last month's forward guidance, expecting rates to stay at 0.5 percent or lower for an "extended period". NO RELIEF FOR AUSSIE The big mover was the Australian dollar, which skidded towards 89 U.S. cents in thin trade, reaching its lowest in three years. The Aussie fell as far as $0.8910 and was on track to end the week down more than 3 percent. It last traded at $0.8949, with the next major level seen at the August 2010 trough of $0.8770. Traders said stops were triggered below 88.00 yen , which took the Aussie to 87.26 yen, it lowest level this year. That sell-off weighed heavily on the commodity currency broadly. The Aussie was already having a bad week following dovish comments from Reserve Bank of Australia (RBA) Governor Glenn Stevens on Tuesday, which led the market to not only price in a cut in rates next week, but a second easing before year-end. "The Aussie is clearly on its knees, in particular we think Stevens gave the green light for the currency to go lower," said Su-Lin Ong, senior economist at RBC in Sydney. "When you get that and generally disappointing Chinese data, the U.S. continuing to point towards a pick up in the economy, it's a whole confluence of factors that keeps downward pressure on the currency." Traders said any disappointment in China's official manufacturing activity data at 0100 GMT could keep the Aussie under pressure. China is Australia's biggest export market. Link this Share this Digg this Email Reprints

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