US Dollar Drifts Up On Safe-haven Buying
The initial direction for the U.S. dollar is rather bullish in early Asian deals Friday as a fall in equity markets in the region following a negative closing in Wall Street overnight enhanced the safe-haven appeal of the currency.
The dollar typically strengthens in times of stock market slide as investors consider it as safe-haven.
Disappointing employment data from the United States and lingering worries about Europe weighed down the positive sentiment in the market.
Initial jobless claims unexpectedly increased in the week ended August 18, rising to 372,000 from the previous week's revised figure of 368,000. Economists had expected jobless claims to slip to 365,000 from the 366,000 originally reported for the previous week.
Also, Federal Reserve Bank of St. Louis President James Bullard said that Federal Reserve policy makers may hold off on further economic stimulus measures because of continued modest economic growth in the U.S.
Worries about the financial situation in Europe sent the euro paring some of its recent gains, with traders keeping a close eye on a meeting between German Chancellor Angela Merkel and French President Francois Hollande. Both Merkel and Hollande urged Greece to stick to crucial reforms in order to remain a part of the eurozone.
With the latest FOMC minutes turning more dovish than expected and the U.S. employment picture in the recent past showing bleak, the Fed Chairman Bernanke's speech at the Jackson Hole Symposium in the month-end is seen crucial as the market is staunch in its longing for further quantitative easing.
The dollar was trading 1.5855 against the pound and 78.62 against the yen after a few hours from its Asian session opening, up a few pips from Thursday's North American session closing values of 1.5863 and 78.50. No clear near-term direction is visible for the dollar against both of these currencies.
Bank of Japan said in a report that the corporate service prices index was down 0.2 percent on year in July, standing at 96.0 following the downwardly revised 0.4 percent contraction in June. On a monthly basis, prices were up 0.1 percent after easing 0.2 percent in June.
The greenback also rose as high as 0.9569 against the Swiss franc and 1.2554 against the euro in mid-morning Asian deals, up slightly from its overnight offshore closing quotes of 0.9561 and 1.2565, respectively. The dollar showed weakness in the past few sessions as elevated stimulus hopes in both the U.S. and China lifted high-yielding currencies.
Looking ahead, the U.K. GDP, exports & imports and government spending data-all for the second quarter are due out in the European session. Market will closely watch the developments in Europe, with the Spanish cabinet meets today and the Greek Prime Minister Antonis Samaras arrives in Berlin for talks with the German Chancellor Angela Merkel.
The U.S. durable goods orders for July is the lone economic data to watch in the New York session.
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