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U.S. dollar trims early losses on services expansion

Publish Date05/03/2013 05:54:37 PM

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The U.S. dollar trimmed early losses against most other currencies on Tuesday as U.S. services activity expanded to its highest level in a year, adding more to economic recovery signs.

The U.S. dollar gained some strength after the Institute for Supply Management’s non-manufacturing index topped estimates and hit its highest level since February 2012, which could prompt the Federal Reserve to scale back is super-easy monetary policy earlier than expected.

The Dollar Index, which is used to track the performance of the U.S. dollar against six other major currencies, rebounded to 82.21, after reaching a low of 81.90 earlier. The index hit a high of 82.22, after having opened at 82.18.

The Australian dollar, also known as the Aussie, appreciated against the U.S. dollar, ending a three-day decline after the Reserve Bank of Australia left its benchmark interest rate unchanged at 3%, noting that benign inflationary conditions left more room for further monetary easing if needed.

The AUD/USD pair jumped to 1.02318, after having opened at 1.01947, while earlier, the pair hit a high of 1.02516, and a low of 1.01865.

As for the Euro, Early gains diminished as investors weighed the chances the ECB will cut interest rates this week. And as the currency bloc`s economy continues to falter despite Tuesday`s data, risk rises that the ECB will ease policy in coming months if not on this week’s decision.

The single currency climbed to a session high on Tuesday of $1.3075 after a euro zone composite PMI survey came in at 47.9, marginally better than the preliminary reading of 47.3. Euro zone retail sales data also beat expectations and provided a slight boost to the single currency earlier today.

The EUR/USD pair hit a high of 1.30749 and a low of 1.30096, after having opened at 1.30228. The pair last traded at 1.30273.

The Japanese government has signaled it wants the BOJ to pursue aggressive monetary easing to stimulate the economy, a stance that has weighed heavily on the yen since November.

The yen strengthened for a second day versus the dollar amid speculation the Bank of Japan’s policy board will refrain from adding stimulus when it convenes for a two-day meeting starting tomorrow until the new administration for the Bank of Japan is settled.

The Yen advanced to 93.366 versus the dollar, trimming early losses as it reached a low of 92.911. It opened at 93.444 against the greenback and reached a high of 93.532.

Data as of 12:50 p.m. New York Time

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