By Tom Westbrook
SINGAPORE (Reuters) – The dollar held firm on Tuesday, shrugging off selling pressure from a move higher in equities, as investors seemed to temper their bearish bets against the greenback ahead of a Thursday speech from U.S. Federal Reserve Chair Jerome Powell.
The dollar, which often falls when stocks rise as investors seek out riskier currencies, had inched higher overnight -repelling the Australian dollar back under 72 U.S. cents and pushing the euro below $1.18.
It hung on to those gains early in the Asia session and the
Fed Chair Powell on Thursday addresses a virtual Jackson Hole symposium with the theme “Navigating the Decade Ahead: Implications for monetary policy.” Investors expect he might address the bank’s strategy – especially its 2% inflation target, with speculation that could become an average rather than nominal aim.
“If we don’t get dovishness, I expect you might actually get rates rising and pop up higher in the U.S. dollar,” said Westpac FX analyst Imre Speizer.
“The dollar has had a massive fall since March,” he said. “I think what we’re seeing now is any excuse to buy it back as the punters who have been short all the way down get quite nervous and take the money off the table.”
A small overnight rise in yields also supported the dollar and against a basket of currencies () it held the line at 93.282, about 1.3% higher than a two-year trough it hit a week ago.
It is about 9.4% below its March peak, though there are signs its decline is slowing as it is broadly steady in August. Net bets against the dollar eased from a nine-year high last week and the U.S. currency has made ground broadly in recent days.
The oil-sensitive Canadian dollar
Elsewhere the Indian rupee
Besides Powell’s speech, investors are also looking ahead to Germany’s IFO Business Climate index, due at 0800 GMT, and expecting a small rise.
U.S. August consumer confidence figures are also due at 1400 GMT and another small rise is expected. Softer-than-forecast data on both continents last week suggests there is downside risk on the data, which could send the euro in either direction.
“We expect more consolidation in euro/dollar this week because of early signs the Eurozone economic recovery is losing momentum,” said Commonwealth Bank of Australia (OTC:) currency analyst Kim Mundy in a note.
“Rising coronavirus infections in some European countries is a key downside risk to the Eurozone’s growth outlook.”
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