Kiwi
recovers, franc dips, eyes on UK 'Super Thursday'
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[August 06, 2015]
By Patrick Graham
LONDON (Reuters) - The New Zealand dollar
was the biggest major currency mover in early European deals, recovering
half a percent from a six-year low in otherwise mostly cautious trade
before the Bank of England’s “Super Thursday” of data releases.
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After a mixed bag of signals from the U.S. economy this week, the
dollar was back in the middle of the past month’s range, having
failed for a third time to break below $1.08 per euro and edging 0.1
percent lower on the day to $1.0910.
The kiwi and the Aussie dollar, down 0.4 percent on poor
unemployment data, were by far the biggest movers in markets focused
on a debate over the timing of rises in British and U.S. interest
rates.
The BoE is not expected to move on Thursday but will publish its
regular inflation report as well as - for the first time - immediate
minutes from the policy meeting, expected to show some members
voting for a hike for the first time this year.
"There is a lot of action due today, but people are sitting cautious
for the moment," said a trader with one international bank in
London.
"There's been an awful lot of hawkish talk this week. My gut feeling
is we may get a disappointment from the Bank of England. The
inflation report may not be as hawkish as the market seems to be
expecting."
The Swiss franc, which traders speculate is being prodded lower by
central bank intervention, hit its lowest in four months against the
euro after data showed Switzerland slipping deeper into deflationary
territory.
"The franc at the moment is the only currency in the G10 space which
is weakening against the euro," said Esther Reichelt, a strategist
with Commerzbank in Frankfurt.
"It seems to us like that is the sharp downward surprise on
inflation this morning rather than intervention by the Swiss
National Bank. These are signs that the economic situation in
Switzerland is deteriorating."
The franc traded at 1.0703 francs per euro, its weakest since March
19. Consumer prices fell 1.3 percent on the year in July.
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While expectations have grown that the U.S. Federal Reserve will
raise official borrowing costs from zero by the end of the year, the
lack of any inflation across the developing world is still holding
markets back.
The dollar has attacked $1.08 per euro three times since mid-March
and conviction that it will head past parity with the single
currency this year or next has waned.
"The market is still reluctant to predict an aggressive tightening
cycle by the Fed next year and that is because of inflation,"
Reichelt said. "At the moment the pricing is for one hike this year
and three next - that is simply not enough for the dollar to go
higher."
The dollar index, which tracks the greenback against a basket of six
major rivals, was steady at 98.033, having hit 98.218, its strongest
since April 23, on Wednesday.
The dollar was flat against the yen at 124.905 yen after briefly
popping above 125.000 on Wednesday for the first time since early
June.
(editing by John Stonestreet)
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