Dollar falls broadly; euro pushes above $1.33
NEW YORK (Aug 7) The U.S. dollar fell broadly against major currencies on Tuesday as Federal Reserve officials hit the speaking circuit, adding to confusion about when the central bank could begin to slow its asset purchases.
The Fed’s bond-buying program is currently set at $85 billion a month and is part of its efforts to revive the economy.
Charles Evans, president of the Chicago Fed Bank, said Tuesday the central bank is “quite likely” to begin stepping back its bond buys this year, adding that economic fundamentals are “actually really better.”
Earlier, Atlanta Fed Bank President Dennis Lockhart said the first slowing from the Fed could be announced at any of the remaining policy meetings in 2013, including at meetings without press conferences scheduled.
The ICE dollar index -0.01% , which tracks the U.S. currency’s movement against six rivals, fell to 81.609 from 81.868 on Monday.
The WSJ Dollar Index, which uses a slightly wider comparison basket, moved down to 73.96 from 74.23.
The issue of the Fed’s timeline for tapering continues to dominate financial markets. The lackluster U.S. jobs report for July, released Friday, put into question broad expectations that the Fed would begin slowing its big bond buys when it meets in September.
Friday’s jobs report was perhaps the “worst outcome” for the currency markets because it wasn’t strong enough to cement the idea of a September taper but wasn’t strong enough to rule it out either, said Shaun Osborne, chief FX strategist at TD Securities.
Action is likely to be muted until the markets get a better sense of the Fed’s thinking, he added. “I think this range-trading environment is probably going to stay in place,” said Osborne.
Also on Tuesday, the U.S. trade deficit fell 22.4% to $34.2 billion in June, the Commerce Department said. That’s the lowest level since the fall of 2009 and likely means the second-quarter growth figure could be revised higher.
A better second-quarter growth figure combined with stronger prospects for economic growth in the third quarter should lead to more speculation about the timing of the taper, said Robert Savage, chief strategist at FX Concepts.
The euro rose above $1.33 on Tuesday, fetching $1.3308 in recent trade from $1.3253 late Monday.