The US dollar was broadly lower against a basket of currencies on Thursday as a strong yen weighed on the greenback. The dollar index slipped to around 95.30 in Asian trading, extending yesterday’s losses. Positive business sentiment surveys out of the US on Wednesday failed to lift the dollar. The Fed’s latest Beige Book, which reports on regional economic conditions, was also not enough to convince traders that a June or July rate hike was a certainty.
The Fed’s June Beige Book pointed to rising wage pressures across many regions of the US as a result of the tightening labor market. This could potentially strengthen the argument of an early rate rise by the Fed, which will meet in two weeks time to deliberate its next move.
The dollar touched a two-week low of 108.82 yen earlier in Asian trading before rebounding back above 109 yen in late session. The yen was supported by increased risk aversion today, but comments from Bank of Japan board member Takehiro Sato also boosted the Japanese currency. Sato was critical of the Bank’s negative rate policy and said the BoJ should not persist in meeting its 2% inflation target “at all costs”.
The yen also rose against other currencies, with the euro dropping to around 122 yen and the pound to around 157 yen.
The euro was firmer on Thursday ahead of the ECB’s policy decision later today. It is expected that the ECB will raise its inflation and growth outlook for the Eurozone, which would lessen the need for further stimulus. However, the ECB’s forecasts for core inflation will also be watched as non-energy prices continue to grow only modestly and below the bank’s 2% target.
The single currency bounced back above the 1.12 level against the dollar in late Asian trading today to climb to a one-week high.
The pound remained under pressure against all major currencies but managed to reclaim the 1.44 level against the dollar after briefly dropping below it yesterday. It was last trading at 1.4435 dollars. Increasing support in recent polls for Britain to leave the EU has raised uncertainty for the UK currency.
In Asian currencies, the Australian dollar was trading lower against its US counterpart on Thursday following disappointing retail sales figures. Retail sales in Australia rose by 0.2% month-on-month in April, missing forecasts of a 0.3% increase. However, a smaller-than-expected trade deficit for April provided some support to the currency. The Aussie was last trading at 0.7232 versus the greenback, up from an earlier low of 0.7218.
The New Zealand dollar rose sharply yesterday on the back of stronger dairy prices. The kiwi jumped 0.8% against the greenback on Wednesday, but it was down slightly in Asian trading at just above 0.68.
Coming up later today, Eurozone producer prices and UK construction PMI will be eyed before the ECB’s policy announcement at 11:45 GMT and President Mario Draghi’s press conference 45 minutes later.
In the US session, the latest weekly jobless claims and the ADP employment report will be watched closely ahead of tomorrow’s non-farm payrolls report.