Dollar Remains Strong, Fed Minutes in Focus
The dollar remained strong on Monday against a basket of currencies. The dollar index inched up 0.1% to 81.352, well above the seven-week trough of 80.868. Analysts said short-term focus remains on minutes of the central bank’s July meeting, that is due Wednesday, August 21. Markets expect that the Federal Reserve could start tapering its stimulus program as early as next month. Consistently strong U.S. economic data have further fueled the expectations.
Dollar rose 0.06% against the euro to 1.3328. Against the yen, it was up 0.04% to 97.62 after rising as much as 0.3%. The Japanese currency was hampered by widening trade deficit. Japan’s trade deficit in July came at 1.02 trillion yen, much wider than the consensus estimate of 773.5 billion yen.
Traders expect the single currency to strengthen after the German data later this week. Analysts polled by Bloomberg estimate German manufacturing PMI to rise from 50.7 in July to 51.1 this month. Moreover, producer prices in Germany are estimated to jump in August. It shows that the single currency region and its largest economy, both are gaining momentum.
The single currency traded at 1.3328 against the greenback, compared to Friday’s closing of 1.3329. It was almost flat against the yen at 130.6.
Australian Dollar (AUD)
The Aussie surged to a three week high amid speculations that the Australian central bank is unlikely to slash interest rates anytime soon. Reserve Bank of Australia will unveil the minutes of its latest policy meeting tomorrow. The Aussie continued to strengthen for the fourth consecutive day on Monday.
Australian dollar soared 0.13% against the U.S. dollar to 0.9210, after briefly rising to three-week highly of 0.9233. Against the yen, it strengthened 0.4% to 89.91.
The British currency was almost flat against its peers after data showed that house prices in the country declined in August. House prices in the U.K witnessed its first monthly fall in August, declining 1.8%, according to Rightmove plc.
Sterling changed hands at 1.5647 versus the greenback after the Confederation of British Industry said that U.K. GDP growth is likely to pick up this year. Despite the fall in August, house prices have still risen 5.5% year-to-date.
Sterling stood at 85.30 pence against the euro. It rose to a 6-week high of 85.05 pence on August 15.
Yuan skidded on Monday after setting up new record highs one after another. The decline was mainly due to weaker guidance by the People’s Bank of China. However, analysts believe that the Chinese currency will continue to appreciate in the mid-term. China has a habit of letting the yuan appreciate before a major even. As the next G20 meeting looms, the currency is expected to rise further.
Before the trading session began, PBOC fixed its official midpoint at 6.1690, 0.04% lower than Friday’s midpoint. Yuan fell 0.12% against the U.S. dollar to 6.1224 from Friday’s closing of 6.1150.