On Tuesday, the dollar gained support as investors anticipated a European Central Bank meeting and U.S. data to judge the policy outlook. The Australian currency rose temporarily after the Reserve Bank of Australia maintained its tapering plans.
At the close of the Asian session, the dollar kept the euro below $1.19 at $1.1872, remained steady against the yen at 109.79 per dollar, and was somewhat firmer against the Australian and New Zealand dollars. The dollar index was trading at 92.200.
The Reserve Bank of Australia maintained its plans to reduce bond purchases. However, it said the timing extended as the economy grappled with coronavirus lockdowns. Traders believe the next swings in currency markets will determine by the European Central Bank meeting on Thursday. In October, the following U.S. jobs report will follow. Last week likely postponed any Federal Reserve tapering announcement after a dismal reading.
The upcoming payroll report on October 8 now looms very large as the significant event in assessing the timing of tapering, Natwest strategist John Briggs wrote in a client note.
Tapering is also on the agenda for Thursday’s ECB meeting, with economists predicting a reduction in bond purchases. The euro’s wobbles and a soaring stock market point to trading floors adopting a slightly different view.
Elsewhere, sterling was somewhat weaker at $1.3830. The kiwi fell slightly to $0.7117 against the Aussie late in Asia trade, as the Aussie reversed its post-RBA rally. In other news, China’s August trade numbers were good, lending support to the yuan. This happened under pressure due to rising expectations of monetary easing.
The Bank of Canada meeting on Wednesday is also on the agenda this week. The central bank is likely to hold rates constant. Meanwhile, it will brush aside a surprise contraction in the economy in the second quarter to stay on track for a rate hike this year.
On Tuesday, the Canadian dollar fell slightly to C$1.2543, but it remains near multiweek highs.
In terms of cryptocurrencies, bitcoin and ether remained stable at $52,736 and $3,927, respectively.
The Central Bank said it would reduce bond purchases by A$1 billion per week to A$4 billion. Still, it also extended the program until at least mid-February, regarded as a dovish concession as lockdowns stymie Australia’s economic recovery.