|09-03-2014, 04:04 PM||#1|
Dollar retreats from near 14-month high
The U.S. dollar traded lower versus a basket of major currencies on Wednesday after setting a new high, as momentum indicators signaled the dollar is overbought.
The dollar index, which tracks the dollar’s movement versus a basket of major currencies, climbed to a 14-month high on Tuesday after a report showing U.S. manufacturing rose to the strongest level in three years.
The most recent data has suggested that recovery in the world’s biggest economy is moving on the right track, thereby helping the dollar to continue its rally this week.
However, all eyes will focus on the awaited nonfarm payrolls on Friday, as investors know that it is the key determinant to any change in the Fed’s monetary policy.
Meanwhile, the dollar index is hovering around 82.87 after hitting a peak of 83.06, where the momentum indicators are moving in overbought areas thereby prompting investors to sell on possible downside correction.
The USDJPY dropped for the first time in four sessions to trade around 104.96 after recording a high of 105.29.
The EURUSD rose for a second session after a report released today signaled the ECB may announce stimulus tomorrow to bolster recovery.
Euro area PMI composite of manufacturing and services eased expansion to record 52.5 in August, lower than forecasts of 52.8, from 53.8 in July.
Markets are waiting for a new stimulus to bolster the anemic recovery and stave off low inflation, where the ECB will also give an update to its quarterly inflation and growth forecasts.
The GBPUSD remained vulnerable following sharp losses overnight despite data showing UK PMI services widened expansion in August to 60.5 from a previous of 59.1.
The pound may continue its bearish direction as the BOE refrained from announcing when it would raise interest rates.
The pair is currently trading around 1.6471 after touching a new low of 1.6443.
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