The dollar held its ground against its peers today following the release of favorable US consumer confidence data as the market stayed watchful leading up to Wednesday’s policy statement by the Federal Reserve. The Conference Board’s consumer confidence index climbed to a reading of 98.1 in January from 96.3 in December while experts forecast an increase to 96.5. The market widely anticipates the Fed to leave interest rates unchanged when it wraps up its 2 day policy meeting tomorrow, while also looking for indications the central bank will reduce the frequency in which rates are increased in light of market volatility of late. The US dollar index was trading steadily at 99.28 still near its 1 month plus high of 99.79 reached last Thursday.
The euro weakened against the dollar with the pair down 0.12% trading at 1.0837 off its session low of 1.0818 after having come off its session high of 1.0873 reached earlier in the day. The pair had reversed early gains as risk sentiment improved following a bounce in oil prices. Extremely low interest rate levels maintained by the European Central Bank have ensured that the euro is used as a funding currency for carry trades. Lagging demand in China and concerns regarding impact on global growth continue to support the euro.
The pound strengthened against the dollar with the pair up 0.6% trading at 1.4349 off its session high of 1.4366 after having come off its session low of 1.4172 reached earlier in the day. The pair had reached an 11 day high furthering its recovery from multi-year lows reached on Thursday. Bank of England Governor Carney reiterated that conditions are not in place for a UK rate hike adding nothing to his remarks from last week.
The yen weakened against the dollar with the pair up 0.17% trading at 118.50 off its session high of 118.62 after having come off its session low of 117.65 reached earlier in the day. Investors also sat on the sidelines waiting for the windup of the Bank of Japan’s policy meeting on Friday. Recent global economic turmoil and remarks from heads of central banks have sparked some predictions the BOJ will ramp up its stimulus measures this year however the majority of analysts anticipate there will be no amendments made to its monetary policy.
The Australian, New Zealand and Canadian dollars strengthened against the greenback. Commodity associated currencies strengthened against the dollar as oil prices recovered to over $30 per barrel. The Aussie was up 0.7% against the dollar with the pair trading at 0.7010 off its session high of 0.7019 after having come off its session low of 0.6918 reached earlier in the day. Markets in Australia were closed in observance of the Australia Day holiday. The kiwi dollar rose 0.5% against the greenback with the pair trading at 0.6499 off its session high of 0.6506 after having come off its session low of 0.6424 reached earlier in the day. The Aussie and the kiwi dollars lost ground against the greenback earlier in the session as Asian equity markets were pushed lower across the board as oil was on the decline. The kiwi dollar was also pressured leading up to the Reserve Bank of New Zealand’s rate review on Thursday. The loonie surged 1.3% making a comeback against the dollar with the pair trading at 1.4084 off its session low of 1.4044 after having come off its session high of 1.4324 reached earlier in the day.
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