FOREX-Dollar climbs vs euro, currency basket on ADP and Draghi

Thu Sep 5, 2013 9:40am EDT

Related Topics

* ECB's Draghi says rates on hold for extended period
    * Dollar/yen hits 100 yen, BoJ stays on hold
    * Market looks to Friday's U.S. nonfarm payrolls


    NEW YORK, Sept 5 (Reuters) - The dollar rose to a six-week
peak against the euro on Thursday after European Central Bank
President Mario Draghi said the bank's Governing Council expects
the key ECB interest rates to remain at present or lower levels
for an extended period.
    Earlier, the bank left its main interest rate unchanged at a
record low of 0.50 percent on Thursday, as recent economic data
has shown a nascent recovery taking hold in the euro zone.
 
    "The most important take away from Draghi's initial remarks
is that he has reiterated the forward guidance that rates will
remain this low or lower for an extended period," said Marc
Chandler, global head of currency strategy at Brown Brothers
Harriman in New York. 
    The dollar was also strong ahead of data that could firm up
the case for a cut in U.S. stimulus from this month. U.S.
private employers added 176,000 jobs in August, nearly matching
economists' expectations for the month, a report by a payrolls
processor showed on Thursday. 
    "The ADP correlation to payrolls is moderate at best, but
the psychological attachment is strong. The market is already
expecting the quantitative easing train to slow in two weeks,
today's ADP result offers modest reinforcement to that view,"
said  Joseph Trevisani, chief market strategist at
WorldWideMarkets, Woodcliff Lake in New Jersey.
    The dollar index was up 0.3 percent at 82.396, not
far from a six-week high of 82.516 hit on Tuesday. The euro was
down 0.3 percent at $1.3154 after earlier falling to a six-week
low of $1.3128.  
    The single currency failed to gain support from a recent run
of encouraging economic data.
    Earlier, sterling was supported after the Bank of England
announced no changes to interest rates or its bond-buying
program and made no further statement on policy. 
    The main focus, however, is on the U.S. nonfarm payrolls
report, due out on Friday.
    If that data confirms a continued recovery in the job
market, it will be seen as sufficient for the Federal Reserve to
decide at its Sept. 17-18 meeting to start reducing its
bond-buying program.
    Expectations that the Fed will be the first major central
bank to hike rates have underpinned the dollar.
    "After all the major central banks are done today the FX
shift would firmly return to the U.S. dollar on Friday. There is
a lot hinged on the non-farm payrolls data," said Neil Jones,
head of hedge fund FX sales at Mizuho Corporate Bank.
    "If the number is around 200,000 the dollar will go higher.
Our dollar forecasts for the next few months are quite upbeat as
the Fed is going to taper this year."
    The dollar tested the 100 yen level, marking a
six-week peak for the currency pair. It was last up 0.11 percent
at 99.87 yen. 
    Traders said the yen suffered as investors unwound their
safe-haven buying, spurred by concerns over a U.S. plan to
attack Syria, while moving little after the Bank of Japan
maintained policy as expected. 
    "It seems like the market is tentatively concluding that any
military action may not last that long and its impact on the
world economy will be limited. The market is coming back to
business as usual," said Bart Wakabayashi, head of forex at
State Street Global Markets in Tokyo.
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