News Column

US Dollar Extends Gain As Economy Rebounds; Fed Decision Due

July 30, 2014

CANBERA (Alliance News) - The US dollar extended its early rally against its major counterparts on Wednesday, as the US economy rebounded strongly in the second quarter, after a winter lull. Traders await the outcome of the US Federal Reserve's monetary policy meeting scheduled later in the day.

The preliminary report from the Commerce Department showed that the US GDP increased 4.0% in the second quarter, following a revised 2.1% decrease in the first quarter.

Economists had expected GDP to rise by 3.0% compared to the 2.9% drop that had been reported for the previous quarter.

According to a report released by payroll processor ADP, the US private sector employment continued to see notable growth in the month of July, although the pace of job growth came in below economist estimates.

The private sector employment increased by 218,000 jobs in July after jumping by 281,000 in June, the data said. Economists had been expecting employment to climb by about 230,000 jobs.

Economists expect the Fed to reduce its asset purchases by another USD10 billion when it concludes its two-day meeting today. Investors will be looking for clues about the timing of monetary tightening on the back of recent positive data, signaling an improving economy.

The greenback added 0.4% to hit a fresh 7-week high of 102.50 against the yen, compared to 102.10 hit late New York Tuesday. Further rally may take the greenback to a resistance around the 103.00 zone.

Japan's industrial output fell 3.3% on month in June, the data from Ministry of Economy, Trade and Industry showed. That was well shy of forecasts for a decline of 1.2% following the 0.7% increase in May.

The greenback appreciated 0.3% to hit over a 6-month high of 0.9099 against the franc. The greenback-franc pair closed deals at 0.9068 on Tuesday. The next likely resistance level for the greenback-franc pair is seen around the 0.92 region.

Switzerland's leading indicator declined unexpectedly in July, data from economic institute KOF showed.

The KOF leading indicator fell to 98.1 in July from 100.5 in June, revised from 100.4. Economists had expected the indicator to rise to 101.

The greenback drifted up to 1.3369 against the euro, a level untouched since November 2013. This is 0.3% higher than the yesterday's closing value of 1.3407. Next key resistance for the greenback lies around the 1.33 mark.

German inflation slowed slightly in July, flash data from Destatis showed.

Inflation, based on harmonized consumer prices, eased to 0.8%, in line with expectations, from 1% in June.

The greenback rose to 1.6901 against the Sterling, a 7-week high, from Tuesday's closing of 1.6941. If the greenback continues its rally, 1.68 is seen as its next possible resistance level.

The Bank of England outlined plans to tighten bankers' bonus rules that eventually limits their inclination to take high risk.

According to the new proposal, bankers could be forced to pay back their bonuses up to seven years from the date of payment if they break financial conduct rules.

The greenback moved up to a 6-week high of 1.0893 against the loonie, near 2-week high of 0.9340 against the aussie and near a 2-month high of 0.8482 against the kiwi, compared to Tuesday's closing values of 1.0850, 0.9383 and 0.8502, respectively. Extension of the dollar's bullish trend may find it challenging resistance around 1.095 against the loonie, 0.925 against the aussie and 0.84 against the kiwi.

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Source: Alliance News

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