By William L. Watts
The U.S. dollar and the Japanese yen lost ground Wednesday as
positive second-quarter earnings surprises dented safe-haven demand
for the low-yielding currencies.
Major currency pairs remain range-bound, but continue to take
short-term trading cues from the equity markets, traders said.
U.S. stock index futures pointed to a higher opening on Wall
Street. European equities were higher, while Asian stocks gained
ground early Wednesday.
The dollar index (DXY), which tracks the greenback against a
trade-weighted basket of six major rivals, was at 79.643, compared
to 80.185 in North American trade late Tuesday afternoon.
The tone in equity markets was set by chip giant Intel (INTC),
which rose 6% in Frankfurt. Intel reported a second-quarter loss
after the U.S. market close Tuesday, with results hit by a fine
from the European Union. Excluding the penalty, however, results
beat forecasts.
Financial markets will continue to digest Tuesday's releases,
while looking forward to earnings from J.P. Morgan Chase (JPM),
Citigroup (C) and Bank of America (BAC), later this week, said
Jessica Hoversen, a currency strategist at MF Global Research in
Chicago.
While strong earnings from Goldman Sachs (GS) on Tuesday morning
and the Intel earnings after the close encouraged risk taking,
results from Yum Brands (YUM) and Altera (ALTR) were less positive,
she noted.
"The greater driver of the trade will be the outlook for
growth," Hoversen said.
The euro was bought $1.4058, up from $1.3933 late Monday.
Annual consumer price inflation in the 16-nation euro zone fell
0.1% in June after a flat reading in May, marking the first time
inflation had turned negative since the launch of the euro a decade
ago, the European Union statistics agency Eurostat confirmed
Wednesday.
The figure matched a preliminary estimate released last
month.
The euro posted little significant reaction to the data.
The British pound, meanwhile, rose 0.4% versus the U.S. dollar
to trade at $1.6387, tracking the stronger tone in financial sector
stocks.
The Office for National Statistics painted a mixed but generally
gloomy picture of the U.K. labor market. The data showed the number
of people claiming jobless benefits rose at its slowest pace in
more than a year in June, but also showed the overall unemployment
rate rose to its highest level since January 1997 in the three
months ending in May.
"Sterling initially softened on the news, but cable [the British
pound vs. the U.S. dollar] continues to hold above last night's
close and well within the confines of its range," said Jane Foley,
research director at Forex.com.
Currency markets had a muted reaction to news that the Bank of
Japan decided at its two-day policy meeting that concluded
Wednesday to extend its special liquidity-boosting measures for an
additional three months to support the recovery.
The dollar was at 93.50 yen, compared with 93.24 yen Tuesday
The Bank of Japan left its overnight call rate unchanged at
0.1%, as was widely expected.