Dollar holds declines as Fed speakers may follow Yellen signal

November 18, 2013

New York  (Nov 18)   The dollar held declines from last week versus most major peers amid speculation some Federal Reserve speakers today will echo Chairman―nominee Janet Yellen in suggesting monetary stimulus is still needed to spur growth.

New York Fed President William C. Dudley, a permanent voter on monetary policy, is scheduled to speak as are Eric Rosengren, Charles Plosser and Narayana Kocherlakota. The yen weakened against the New Zealand dollar and traded near a two―month low versus the greenback before Bank of Japan policy makers meet this week. The kiwi rose as a private report showed services activity gained to match the highest level since 2007.

“In the short term, the U.S dollar could weaken as the realization that tapering is not imminent occurs,” said Hans Kunnen, a senior economist at St. George Bank Ltd. in Sydney. “US data will be murky for the next few months until the shutdown washes through. Any data at present is treated with a little bit of suspicion,” he said referring to a partial government shutdown in the US last month.

The dollar traded at US$1.3481 per euro as of 8:39 a.m. in Tokyo, little changed from Nov. 15 after a 1 percent weekly drop. It rose 0.2 per cent to 100.36 yen after touching 100.44 last week, the strongest level since Sept. 11. Japan’s currency fell 0.1 percent to 135.31 per euro.

Taper Timing

Yellen at her Nov. 14 congressional hearing indicated she’ll press on with the central bank’s unprecedented monetary stimulus until she sees a robust recovery, downplaying risks the policy is inflating asset bubbles. Dudley said Oct. 15 that the Fed is missing “by much more” on the employment side of its mandate than on the inflation side.

Economists forecast the Fed will delay tapering asset purchases until March even after a report showed employers added more jobs than forecast in October.

Policy makers will pare the monthly pace of bond buying to US$70 billion at their March 18-19 meeting from the current pace of US$85 billion, according to the median of 32 economist estimates in a Bloomberg News survey on Nov. 8. Futures traders increased their bets that the yen will decline against the US dollar to the most since May, figures from the Washington-based Commodity Futures Trading Commission showed last week.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain― so―called net shorts ― was 95,107 on Nov. 12, compared with net shorts of 73,792 a week earlier.

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