Dollar lacks momentum ahead of central bank meetings

London

THE US dollar slipped on Tuesday (Oct 26) but struggled to gain momentum, with most major currency pairs little changed as investors waited for major central bank meetings this week and next to indicate the direction of currency markets.

The Bank of Canada meets on Oct 27, then the Bank of Japan (BOJ) and European Central Bank (ECB) meetings are on Oct 28. Next week the Reserve Bank of Australia meets on Nov 2, the US Federal Reserve on Nov 3, and the Bank of England and Norges Bank on Nov 4.

In equity markets there were signs of improved risk appetite due to strong earnings, with European stocks opening higher following a rally in the Asian session.

But the dollar index held steady, down 0.1 per cent at 93.724 at 1132 GMT.

Simon Harvey, a currency analyst at Monex Europe, said that a flattening of the US yield curve also contributed to the dollar's downward move, by improving risk appetite.

The greenback rose 0.2 per cent against the Japanese yen, with the pair at 113.930, holding below the 4-year high of 114.695 reached last week.

The BOJ is set to maintain its massive stimulus programme and slash this year's inflation forecast in a sign it has no intention to follow other central banks that are preparing exits from crisis-mode policies.

The Canadian dollar was steady ahead of Oct 27's meeting, at which the central bank is expected to raise its inflation forecast and to largely end stimulus from its pandemic-era bond buying programme, starting a tentative countdown to the first interest rate hike since October 2018.

The Australian dollar, seen as a liquid proxy for risk appetite, was up 0.3 per cent at US$0.75155. Last week, it rose above the key US$0.75 level for the first time since July.

The New Zealand dollar was up 0.4 per cent at US$0.71895.

The euro was up 0.1 per cent at US$1.162. Expectations that the ECB will take a dovish stance when it meets on Oct 28 have weakened the euro in recent sessions.

China's offshore yuan was a touch stronger against the dollar, with the pair changing hands at 6.3771.

A call between China's Vice-Premier Liu He and US Treasury Secretary Janet Yellen was seen as positive for Sino-US relations.

Bitcoin was down around 0.6 per cent at US$62,742.65 at 1138 GMT, having fallen below the all-time high of US$67,016.50 it reached last week. REUTERS