WorldWideMarkets Community

Forex Trading, Market News & Technical Analysis

Dollar Inches Up on Fed Tapering Prospect, Aussie Slides - (Reuters)

Posted by Chris Advincula on Jul 30, 2013 6:14:00 AM

* Dollar index inches away from recent five-week low

* Aussie slides on comments by RBA governor

* Fed meeting in focus as ECB, BoE also meet this week

* Swedish crown falls on weak Q2 GDP data

By Jessica Mortimer

LONDON, July 30 (Reuters) - The dollar edged higher on Tuesday, recovering from recent falls, on caution that the Federal Reserve may lay the groundwork for curbing stimulus at a policy meeting this week.

The dollar index, which measures the dollar's value against a basket of currencies, was up 0.1 percent at 81.724, pulling away from Monday's five-week low of 81.499 and holding above chart support at 81.524, the 200-day moving average.

The dollar has retreated over the past few weeks since Federal Reserve Chairman Ben Bernanke stressed a highly accommodative monetary policy was still necessary.

But analysts said traders were wary of selling the dollar heavily due to expectations the Fed will scale back monetary stimulus in the 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 come under selling pressure after a media report last week said the Fed may tweak forward guidance to stress that interest rates will stay low for a long time.

Rasmussen said such comments from the Fed could weigh on the dollar, possibly pushing the euro up towards $1.3350, but he recommended using any pullbacks to buy back the U.S. currency.

The euro was steady at $1.3266, just below Friday's five-week high of $1.32975 and chart resistance at $1.3300.

The European Central Bank and the Bank of England are expected to maintain pledges to keep monetary policy loose after policy meetings ending on Thursday.

Analysts at Barclays recommended investors reinitiate 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. private sector activity data, which may come when U.S. monthly jobs figures are released on Friday, could lead to a stronger dollar.

The dollar was up 0.3 percent at 98.19 yen.



The Australian dollar slid 1.5 percent on the day to $0.9064 - just above a near three-year low 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 ground after data showed the Swedish economy unexpectedly contracted by 0.1 percent during the second quarter of the year, helping the euro rise 0.6 percent to 8.6412 crowns.


aud.7.30 resized 600

Chart: WorldWideMarkets Flash Trader


Tools & Educational Resources

Forex 101LEARN MORE >>
Learn the basics of Forex and how to practice trading the markets.

GlossaryLEARN MORE >>
Confused by the language? Click here and search for key trading terms.

Browse our frequently asked questions and find your answers right away.

Access to the educational lessons, webinars and platform walkthroughs.


Get started with a FREE $10,000 Demo Account and experience the Forex Market RISK FREE!