Dollar edges higher with focus on Fed for taper clues

London

THE US dollar climbed to the higher end of recent ranges against other major currencies on Thursday, as traders looked to next week's Federal Reserve policy meeting for indications on how soon the US central bank will start to taper stimulus.

The dollar index, which measures the US currency against six others, was 0.3 per cent higher at 92.743. It reached a two-week high of 92.887 at the start of the week, only to drop to a one-week low of 92.321 on Sept 14 after a softer-than-expected inflation report. Its low for the month was 91.941, on Sept 3, when payrolls data disappointed.

On Sept 15, industrial production data in the US marginally missed expectations, while import and export prices came in below expectations. The figures, alongside this week's inflation report, will help reduce pressure on the Federal Reserve at its meeting next week, said Robert Cobo Garcia, head of FX strategy at BBVA. Even so, he said, commodity prices and the prices sub-components of the "Empire" survey suggest inflation pressures driven by rising costs are not over.

The Federal Open Market Committee's two-day policy meeting ending Sept 22 should provide some clarity on the outlook for both tapering and eventual interest rate hikes. Tapering typically lifts the dollar as it suggests the Fed is one step closer to tighter monetary policy. It also means that the central bank will be buying fewer debt assets, in effect reducing the amount of dollars in circulation, which in turn lifts the currency's value.

The dollar gained 0.1 per cent to 109.28 yen, after sliding to a six-week low of 109.110 in the previous session. The euro was 0.4 per cent lower at US$1.1770. The Swiss franc was another loser against the dollar, falling to its lowest in more than 2 months at 0.9248 francs.

Elsewhere, Norway's crown was a touch lower at 8.5965 per dollar, off the more than two-month high of 8.5598 reached overnight amid a rally in oil prices. Against the euro, the crown touched its strongest level since June 25 at 10.1119.

The Australian dollar slipped back toward the lowest this month as Dalian iron ore prices slumped to a new low for the year. The Aussie lost 0.2 per cent to US$0.7315, after dipping to US$0.73015 on Sept 15 for the first time since Aug 31. The New Zealand dollar edged up 0.1 per cent to US$0.7112, giving up an earlier jump of as much as 0.47 per cent after the economy grew at a much faster pace than expected. REUTERS