The dollar climbed on Thursday (Jun 20), while the Swiss franc and the pound dropped as a busy day of central bank meetings kept currency traders alert.
The dollar index, which tracks the currency against six peers, was last up 0.2 per cent at 105.42 after a volatile 10 days that has seen mixed signals from the US economy and European markets rocked by French political uncertainty.
Helping the US currency climb was a drop in the pound after the Bank of England policy announcement, and the Swiss franc after the Swiss National Bank lowered interest rates to 1.25 per cent, following a cut in March.
Sterling slipped 0.2 per cent to US$1.2691 after the BoE voted 7-2 to keep its main interest rate unchanged, but some policymakers said their decision not to cut was “finely balanced”.
“The pound is trading lower on the ‘finely balanced’ comment,” said Neil Jones, senior FX sales to financial institutions at TJM Europe.
“This is clearly a dovish hold. The narrative from Bailey suggests for some, they are close to cutting.”
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The dollar, meanwhile, climbed 0.6 per cent to 0.8894 francs as the Swiss currency fell from around a three-month high in the wake of the rate cut, which came with forecasts predicting a further fall in inflation to 1.1 per cent in 2025.
“Given the appreciation of the franc in the context of the French political turbulence, we had expected a dovish message, but not a cut,” said Christian Schulz, deputy chief European economist at Citi.
“This cut could be premature if French politics stabilise and weakens the franc,” he said. The franc is seen as a safe haven and had risen over the last week.
Elsewhere, the Norwegian crown rose to a four-month high against the euro after the Norges Bank held rates at a 16-year high of 4.25 per cent.
The euro fell to its lowest since late January against the crown at 11.2777. It was last down 0.5 per cent.
Volatility in currency markets has picked up over the last 10 days as political uncertainty in Europe has combined with the long-standing guessing game about central bank rate cuts to cause investors new problems.
The US dollar rallied last week while the euro tumbled to its lowest since May 1 as markets fretted that French President Emmanuel Macron’s gamble to call parliamentary elections could pave the way for the high-spending far right or far left to come to power.
Markets have been more placid this week. The dollar dipped after data on Tuesday showed US retail sales were lower than expected in May, adding to some signs that the economy is slowing and could allow the Federal Reserve to cut interest rates in September. However, separate data showed manufacturing production surged last month.
The euro was on the back foot again on Thursday, down 0.16 per cent against the dollar to US$1.07285, but still above the six-week low of US$1.0667 hit on Friday.
Japan’s yen fell to its lowest since April 29, when Japanese authorities launched their latest round of intervention to prop up the currency. The dollar rose as high as 158.47 yen, but was last up 0.2 per cent to 158.41.
The country’s top currency diplomat Masato Kanda said there is no limit to the resources available for foreign exchange interventions, according to Jiji News Agency. REUTERS
