The U.S. dollar fell Thursday as markets digested or awaited key central bank decisions, with the British pound straddling the psychologically important $1.50 level and the yen moving in tight ranges after the Bank of Japan left its policy unchanged.
The ICE dollar index slipped to 82.471 in Tokyo afternoon trade from 82.490 in North America late Wednesday, reflecting the greenback’s broad weakness against a group of six major global currencies.
The WSJ dollar index , a measure of the currency’s performance against a slightly wider basket of rival units, slipped to 73.36 from 73.40.
Among major units, Britain’s pound sterling saw choppy movements ahead of what many analysts expect to be a split decision at the Bank of England on further quantitative easing.
After swinging on both sides of the $1.50 level over the session, the pound was at $1.5004, compared with $1.5032 overnight in New York. The currency fell as low as $1.4978 earlier in the day, a level it hasn’t seen since around June 2010.
The pound’s weakness followed a Financial Times report that U.K. Chancellor George Osborne will use his budget on March 20 to reinforce the message of “fiscal conservatism and monetary activism.”
Treasury officials are discussing proposals to change the bank’s remit with the arrival of Mark Carney as the central-bank governor in July. Options being considered include giving the BOE’s policy-setting committee greater time to bring inflation back to the 2% targeted level, in addition to expanding its mandate so it can target both employment and inflation, the report said.
“Sterling could conceivably come under renewed pressure today if the U.K. Monetary Policy Committee decides to restart quantitative easing,” said John Higgins, an economist at Capital Economics.
“One factor that has weighed on sterling in recent months is the perception that a more ‘flexible’ BOE is poised to step on the monetary accelerator — perhaps putting the pedal to the metal when Mark Carney takes over as governor in July — just as the [U.S. Federal Reserve and the European Central Bank] apply the brakes,” Higgins added.
The euro, meanwhile, moved in narrow ranges ahead of the ECB’s policy meeting later in the day, amid expectations that the central bank will leave its policy rates unchanged. Some analysts said, however, that markets will be watchful for the ECB’s policy outlook.
The common currency was fetching $1.2994, compared with $1.2987. Against the Japanese unit, it was trading at 122.02 yen versus ¥122.20.
The U.S. dollar was buying ¥93.90, down from ¥94.08.
The yen’s moves followed the Bank of Japan’s decision earlier in the day to leave its interest rate and the size of the asset-purchase program at current levels. The meeting was the last one chaired by Gov. Masaaki Shirakawa before he and two of his deputies step down on March 19.
Meantime, the Canadian dollar, or the loonie, inched up to recover some losses from the previous day, when it skidded after the Bank of Canada indicated plans to continue its own monetary-policy stimulus.
The dollar was buying 1.0310 Canadian dollars, down from 1.0315 Canadian dollars.
Among other major pairs, the Australian dollar was trading at $1.0250, compared with $1.0236.
Marketwatch
