Dollar closes in cautious mood for risk, euro awaits key ECB decision
Euro banknotes with different values.
Jens Buttner | photo alliance via Getty Images
The dollar was supported on Thursday by cautious risk sentiment stemming in part from concerns about the delta variant as the euro looked into the European Central Bank’s policy decision later in the day.
The dollar index stood at 92.712, after rising for the third day in a row on Wednesday as US stocks retreated with their high valuation undermined by doubts about the strength of the economic recovery.
Risk sentiment was strengthened slightly after influential New York Fed Chairman John Williams said on Wednesday evening that more progress was needed in the job market before cutting his stimulus measures.
Still, his comments came as no surprise to anyone after the surprisingly weak US payroll figures released on Friday effectively ruled out any chance of a Fed cut this month.
The European Central Bank, on the other hand, is expected to recover stimulus measures on Thursday, taking a symbolic step towards unwinding the emergency economic aid it put in place during the pandemic.
Analysts polled by Reuters see purchases under the Pandemic Emergency Purchase Program (PEPP) drop to 60 billion euros per month from the current 80 billion, before a further decline at the start next year and the end of the program in March.
But at the same time, the ECB is expected to signal strong support for years to come, even after the PEPP expires.
“If the ECB’s board of directors plans to reduce its bond purchases under the PEPP, it will ensure that it continues its conventional asset purchase program,” said Daisuke Uno, strategist in head of Sumitomo Mitsui Bank.
“So it will probably be a policy change with a caveat. The euro may end up having little momentum in the end.”
The common currency slipped to $ 1.1819, extending its pullback from Friday’s two-month high of $ 1.1909. The British pound also fell to $ 1.3773 after peaking at $ 1.38905.
The yen was little moved to 110.24 per dollar while the Australian dollar slipped to $ 0.7368.
The Canadian dollar changed hands to C $ 1.2693 against the US dollar, after falling to its lowest level since August 23.
The Bank of Canada left its key rate at a record low of 0.25% and maintained its current quantitative easing program on Wednesday.
The Chinese yuan was at 6.457 per dollar ahead of Chinese inflation data later today.
A stronger dollar also put pressure on many emerging market currencies, with the Brazilian real and Turkish lira among the hardest hit.
The real fell nearly 3% on Wednesday to 5.3214 per dollar amid heightened political concerns as President Jair Bolsonaro slammed the country’s Supreme Court, encouraging people to disobey its rulings.
The pound fell 1.4% to 8.468 per dollar after Turkey’s central bank governor Sahap Kavcioglu said on Wednesday that the current policy rate of 19% was tight enough to bring inflation down.
Elsewhere, Bitcoin remained fragile after Tuesday’s 11% plunge.
It faces new challenges as the U.S. financial watchdog has warned leading cryptocurrency exchange operator Coinbase that it will sue if it goes ahead with the launch of its product. ” Loan “bearing interest in crypto assets.
The last coin was $ 46,650 while Ether changed hands to $ 3,480.