The dollar was holding a narrowly mixed tone Thursday, fractionally softer against the euro as the greenback continued to feel its Federal Reserve-induced hangover, but fractionally firmer against the yen as the Japanese currency viewed the prospects of a weekend election in Japan. Euro-dollar was changing hands at $1.3070 Thursday afternoon, the euro in the middle of its $1.3055-98 U.S. hours range after beginning the day at $1.3060. Dollar-yen meantime was trading at Y83.57, slightly above its early Y83.44 level of the day but after holding in a narrow Y83.38-61 U.S. hours range. Afternoon dealings were at a trickle Thursday and followed a morning session that also saw generally light volumes and limited currency swings, though trading came against a backdrop of risk-aversion fueled by weaker U.S. stocks. Mid afternoon, the Dow Jones Industrial Average was nursing losses of about 100 points. As a consequence of that risk-aversion, the euro had edged back to mid-range after seeing late morning highs near the $1.3100 overnight high, only to fall back again as traders reported good supply in the pair from a Dutch bank known to act on behalf of a European sovereign. Overnight, euro had stalled at that same area, only to be driven lower by euro sales from Swiss banks and from an Asian sovereign name, traders said. Earlier in December, euro-dollar had minted a high at $1.3127 before reversing lower, setting up levels above $1.3100 as key technical resistance. Traders remind that the dollar has held a defensive tone versus the euro since Wednesday after the Federal Open Market Committee tweaked its asset buying programs and policy guidance. Dollar-yen meantime was holding around the midpoint of the U.S. session range, though was still in the upper reaches of the day’s range, the yen remaining defensive ahead of Japanese elections set for Sunday. With opinion polls in Japan suggesting that the Liberal Democratic party, led by Shinzo Abe, likely will score a strong victory, the yen was left defensive on the notion that the LDP leader has promised to pressure the central bank to take more aggressive steps to boost the economy, steps that likely would weigh on the yen, traders surmise. Reports and opinion polls say that the LDP could garner as many as 300 seats in the 480 seat lower house, sufficient to allow it to rule without a coalition partner, if need be. While many agree with that notion, some traders caution that the bet against the yen is now quite hefty after real-money players and model-driven funds increased short yen positions this week, and some worry that the yen could rebound sharply if something triggers a round of profit-taking on those positions. Elsewhere, and adding to the cautious tone of markets, rating agency S&P shifted its outlook on the U.K. to negative, warning that the country could face a downgrade within two years unless its fiscal position improves. That warning to some of the shine off the British pound, returning the currency to $1.6100 after it had traded to $1.6150 intra-day. U.S. economic data released Thursday had limited impact on trading. Weekly initial jobless claims fell by 29,000 to 343,000 in the December 8 week, the lowest since early October, with no special factors. November retail sales rose 0.3% overall but were flat ex autos and up 0.7% ex autos and gasoline, in a rebound from an unrevised 0.3% drop in October. The November producer price index fell 0.8% overall, core rose 0.1% (+0.109% unrounded) for a 1.5% rise year-on-year overall and 2.2% year-on-year increase in core, about as expected. Food rose 1.3% as beef and vegetables soared. Energy fell 4.6%, led by lower gasoline and heating oil. Business inventories rose 0.4% in October, and business sales fell 0.4%, putting the inventory/sales ratio at 1.29 after 1.28 in September.
EasyForexNews Research Team