Dollar Down Ahead Of FOMC Minutes

Dollar Down Ahead Of FOMC Minutes


The dollar was mildly weaker against most major currencies in early deals Wednesday ahead of the minutes of the Federal Reserve's July 31st-August 1st meeting, which is due for release later in the New York session.
Traders expect that the outcome of the FOMC minutes would provide some directions to spur the fragile economic recovery. Market is also eagerly waiting that whether the Fed would decide to keep interest rates at exceptionally low levels through late 2014.
However, some upbeat economic data from the U.S. since the Federal Reserve's last meeting undermined hopes that another round of quantitative easing unlikely at its next meeting on Sept. 12. At this juncture, the Fed Chairman Bernanke's speech at the Jackson Hole Symposium in the month-end is seen crucial.
Market sentiment is also awaiting the outcome of a series of bilateral meetings between key Eurozone leaders, which are expected to produce a lasting solution to the region's prolonged sovereign debt crisis. Yesterday's Spanish auction showed a steep decline in the nation's borrowing costs amid speculation that the European Central Bank would resume its purchase of peripheral bonds.
The greenback rally against the yen was seen short-lived, with the pair pulling back from 79.39 towards its Asian session low of 79.18. The medium-term bias for the dollar-yen pair is quite negative as it is in a descending track from its key resistance level of 79.65/70 hit earlier this week.
Japan posted a merchandise trade deficit of 517.382 billion yen in July, the Ministry of Finance said today, sinking into the red for the eighth time in 10 months. The headline figure was sharply below forecasts for a shortfall of 270.0 billion yen following the downwardly revised 60.3 billion surplus in June.
Exports plummeted 8.1 percent on year, well shy of expectations for a decline of 2.9 percent following the 2.3 percent contraction in the previous month. Imports were up 2.1 percent on year versus forecasts for an increase of 3.0 percent after shedding 2.2 percent a month earlier.
The dollar extended yesterday's downtrend against the pound, falling as low as 1.5819 before erasing some losses around 4:20 am ET. The dollar stayed below the key 1.58 level against the pound for the second consecutive day, which is also its weakest mark in 3-months.
The greenback remained weaker at 1.2480 against the euro in early deals but managed to stay below yesterday's near 7-week low of 1.2489. The pair, which has broken the ascending triangle formation in the 2-hour chart and edged sharply higher yesterday, is presently hovering around the 1.2470 level.
The greenback remained quite against the Swiss franc, trading between a high of 0.9651 and a low of 0.9627. The US currency also staged a free-fall against the Swiss franc yesterday, after having broken the descending triangle formation in the 2-hour chart.
Looking ahead, the US existing home sales for July is the lone data to watch ahead of the FOMC minutes in the North American session.


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