Dollar finds footing as traders turn to US services data

SINGAPORE: The dollar steadied on Wednesday as traders pared back on riskier bets in emerging markets while waiting on an interest rate decision in Canada and on US services data.

The Swiss franc and yen were also beneficiaries of the sentiment, with the yen receiving an extra boost after Bloomberg News reported the Bank of Japan was likely to mull cuts to bond buying at its policy meeting next week.

The yen eased 0.2% to 155.27 in early trade in the Asia session, and hovered at 168.74 to the euro after making 1% jump on the common currency overnight – its largest such rise since Japan intervened in FX markets a month ago.

“We would expect to see further yen short covering ahead of the BOJ’s June 14 policy decision,” said Rabobank strategist Jane Foley in a note to clients. Japanese real wages fell for a 25th straight month in April, data on Wednesday showed, as inflation outpaces nominal pay rises.

The yen is the worst-performing G10 currency this year, by some margin, and on Tuesday BOJ Deputy Governor Ryozo Himino said the central bank must be “very vigilant” to the impact the currency’s weakness could have on the economy and inflation.

The Swiss franc rose for a fourth straight session on the dollar overnight and at 0.8902 per dollar is close to breaking through its 200-day moving average.

Other majors eased slightly on the dollar even though US bond yields fell.

The euro was steady in the Asia session at $1.0878 and sterling bought $1.2770, both a little softer than they had been a day earlier.

Dollar rebounds from multi-month lows

The Australian dollar was a tad weaker at $0.6443 with Australian GDP data due and Westpac forecasting annual growth at just 1%, which excluding the pandemic years would be the slowest pace since 1991.

Australia’s top central banker told parliament that growth in the March quarter was expected to be weak as high interest rates work to restrain demand.

The New Zealand dollar was steady at $0.6173, while the Canadian dollar held the middle of a months-long range at C$1.3678 per dollar.