US Dollar Declines Against Majors; FOMC Minutes Eyed

April 8, 2014

Canbera-Australia (Apr 8)  The US dollar lost ground against other major currencies in the European session on Tuesday, as traders await the Federal Reserve's minutes of monetary policy meeting held on March 18-19.

The minutes, to be released tomorrow, would provide more insights about the Fed's monetary policy outlook. The Fed Chair Janet Yellen surprised markets last month, saying that the central bank would start hiking rates six months after the end of quantitative easing.

Signs of improving economy made the Federal Reserve policy makers to reduce the asset purchase programme by USD10 per billion each per month.

However, Yellen last week clarified that the US economy still needs unprecedented accommodation for "some time" as there remains "considerable slack" in the labor market.

The greenback depreciated to 0.8850 against the franc for the first time since April 3. The next possible downside target for the greenback lies around the 0.88 zone.

yen, a level not seen since March 28. Further decline may take the greenback to support at the 101.7 region.

The Bank of Japan left its monetary policy unchanged and maintained its upbeat economic outlook even after the government raised the sales tax this month for the first time since 1997. The policy board decided to maintain the annual pace of increase of the monetary base at 60 trillion yen to 70 trillion yen.

Reversing from an early high of 1.3737 against the euro, the greenback slipped to a 5-day low of 1.3774. On the downside, 1.384 is seen as the next support level for the greenback.

The greenback weakened to 1.6719 against the pound, its lowest level since March 10. The greenback is likely to seek support around the 1.68 area.

UK industrial production grew more-than-expected in February, driven by strong contribution by oil and gas extraction. The UK National Statistical Office reported that industrial production grew 0.9% in February from month ago, when it remained flat.

The greenback touched 0.9342 against the aussie, setting more than a 4-month low, and a weekly low of 0.8681 against the NZ dollar. If the greenback extends slide, it may eye support around 0.945 against the aussie and 0.88 against the kiwi.

The greenback fell to 1.0920 against the loonie, its weakest since February 19. The greenback may test support surrounding the 1.08 region.

Looking ahead, Canada housing starts for March and building permits for February are slated for release at 8:15 am ET and 8:30 am ET, respectively.

Minneapolis Federal Reserve Bank President Narayana Kocherlakota is due to speak in Rochester, Minnesota later in the day. Philadelphia Federal Reserve Bank President Charles Plosser will speak on prudential regulation in Philadelphia at 2:45 pm ET. Chicago Fed President Charles Evans is scheduled to participate on an IMF panel on fiscal policy and managing the transition to normality at 4 pm ET.

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