The U.S. dollar extends its grind higher, with Australia’s currency rising and the Japanese yen falling as risk sentiment improves.
By Michael Kitchen
LOS ANGELES (MarketWatch) — The U.S. dollar extended its grind higher in Friday trade, with Australia’s currency rising and the Japanese yen falling as risk sentiment improved.
The ICE dollar index , a measure of the U.S. unit against six other currencies, edged up to 81.026 from 80.986 late Thursday, after a day of similarly modest gains. The WSJ Dollar Index rose to 73.42 from 73.39.
The greenback’s gains came despite Senate testimony from Federal Reserve Vice Chairwoman Janet Yellen widely seen as dovish. Yellen voiced support for the Fed’s current bond-buying program, though her comments were in line with her prepared remarks released a day earlier.
“The only reason why the dollar did not move lower is because there were no surprises in Yellen’s testimony, and most importantly, she said nothing to change the market’s expectations for tapering [of monetary stimulus] in the next four months,” wrote BK Asset Management managing director Kathy Lien.
Among the major Asian currency pairs, the Australian dollar rose to 93.45 U.S. cents from late Thursday’s 93.20 U.S. cents, while the dollar gained against the Japanese yen , buying ¥100.19 from ¥99.99.
The Australian dollar tends to rise, and the yen often falls, when investors see less risk in the market, and RBC Capital Markets senior currency strategist Sue Trinh cited talk of fresh reform announcements due out of China as helping boost the market’s mood.
“Despite the vacuum of data, risk sentiment was supported by reports that the Chinese Communist Party’s Central Committee passed a 20,000-word ‘decision about major issues related to reform’ at its Third Plenum, which will be released in days,” Trinh wrote.
The initial statement made at the close of the Third Plenum meeting of top Chinese officials had disappointed the market, as hoped-for reforms were discussed in only vague terms. While there is no set time for the release of the more detailed “decision” report, it is likely to emerge sometime early next week.
Trinh also said that dollar-yen’s break above the ¥100 level had now satisfied the desired ranges set by three senior Japanese monetary-policy officials back in January.
“These officials expressed their desired dollar-yen ranges/level following the general election in December, a month that saw dollar-yen trading [at] an average of ¥83.85. Job done,” she wrote.
