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LONDON, Aug 15: Sterling fell back from Wednesday’s one-week high against the dollar on Thursday as a positive Wall street opening underpinned the greenback across the board.
Key indices on Wall Street opened higher on Thursday, maintaining the previous session’s sharp gains and supporting the dollar.
With no UK economic data or major domestic events due until next week, dealers say sterling was trapped between movements in the dollar and the euro.
It’s been trading in tight ranges and things are quiet because of European holidays. We won’t have any UK data until next week so people are just squaring their positions, a European bank dealer said.
NEW YORK: The dollar was slightly firmer against European currencies and the yen on Thursday, drawing support from a stable US equity market after hundreds of US chief executives met a deadline to vouch for their financial results.
The CEO deadline came to pass and there were no new bad numbers so (it was) a bit of a relief for the equity market and therefore the dollar is being strengthened, said Hugh Walsh, vice president at Fortis USA in New York.
Given the lower trading volumes due to a sprinkling of holidays throughout Europe, investors are reluctant to put on new positions ahead of regional US manufacturing data from the Philadelphia Federal Reserve Bank at noon.
The Philly Fed index is forecast to rise to 7.2 from 6.6 in July.
We are really waiting for the Philly Fed. It’s the first information on business sentiment in August. The market is positioned for a rebound, said Hans Redeker, chief foreign exchange strategist at BNP Paribas.
Sentiment, however, for US assets was bolstered by a 0.2 per cent gain in July industrial production, extending gains for the seventh month running and confounding economists surveyed by Reuters who forecast a drop of 0.1 percent.
To the degree that the stock market gains some confidence as a result of these indications of stability in the manufacturing sector, this will be a positive for the dollar, he said.
The dollar made back just a small portion of the ground it lost on Wednesday against the yen, rising to 117.65 yen, a gain of 0.27 per cent on the day.
The euro slid to 97.75 cents, a loss of 0.13 per cent against the dollar on the day.
The dollar rose to 1.4960 Swiss francs, up 0.30 per cent on the day. Earlier, the Swiss National Bank trimmed its repo rate by a basis point to 0.59 per cent.
Dealers in Asia said sentiment toward the dollar was also dampened by an announcement from No. 2 US carrier, United Airlines, on Wednesday that it may file for bankruptcy this autumn if it cannot dramatically cut costs.
US stocks were modestly higher in early trade, after surging higher in a late rally on Wednesday. The Dow Jones industrial average rose 1 per cent; the Nasdaq Composite index 1.1 per cent and the S&P 500 1.3 per cent.
This Philly Fed is the big focus of everything, said one IMM futures trader. I don’t know how it could be much worse of a change than last time.
Dealers noted mid-size to large institutions buying euros, Swiss francs and yen on the open.
September euros were negative after trimming losses from a three-session low of $0.9734. September yen also were lower but confined to Wednesday’s range of $0.008459 to $0.008615. And September Swiss francs were near a two-session low of $0.6666.
I’m negative to the euro, a trader said. I just don’t think it has any business being over a dollar or near a dollar.—Reuters
