By Lisa Twaronite, MarketWatch
TOKYO (MarketWatch) — The dollar lost more ground to the euro in Asian trading Wednesday, on growing perceptions that the European Central Bank will signal it’s concerned about inflation.
On Thursday, the ECB will hold its regular meeting, and President Jean-Claude Trichet will speak. While no interest-rate action is expected at the meeting, any mention that the bank is worried about inflation would suggest that a hike will come sooner rather than later.
The euro (EURUSD 1.3844, +0.0015, +0.1085%) changed hands at $1.3853, up from $1.3835 in late North American trading Tuesday.
Some analysts said that historical patterns also favor a higher euro against its U.S. counterpart.
“Strong U.S. Dow Jones Industrial Average (DJIA 12,040, +148.23, +1.25%) and S&P 500 (SPX 1,308, +21.47, +1.67%) performance through January suggests that stocks and potentially the euro/U.S. dollar currency pair could continue higher through the rest of the year,” said David Rodriguez and Jamie Saettele, strategists at DailyFX.
Based on their 61-year study of the U.S. stock indexes since 1950, January performance predicts the direction of performance for February-December in 44 out of 61 years. A similar study of euro/U.S. dollar exchange rates showed January performance predicted the change through the rest of the year in 20 of the past 31 years, they wrote in a research note.
“Any responsible statistician would tell you that correlation does not imply causality, and this could be mere coincidence. Yet the evidence is difficult to deny, and a euro/U.S. dollar and S&P 500 advance through January may set the stage for continued strength through the year,” they said.
The dollar index (DXY 76.96, -0.11, -0.14%) , which tracks the greenback against a basket of six other currencies, rose to 76.920 from 76.008 late Tuesday.
Against the Japanese yen, the dollar (USDYEN 81.5100, +0.2200, +0.2706%) edged higher to ¥81.47, up from ¥81.40 late Tuesday.
The British pound (GBPUSD 1.6158, +0.0014, +0.0867%) bought $1.6176, up from $1.6148.
The Australian dollar (AUDUSD 1.0111, -0.0005, -0.0494%) bought $1.0122, compared to $1.0129 late Tuesday.
The Australian unit could come under pressure later in the session as a Cyclone Yasi approaches the North Queensland coast. The Bureau of Meteorology said that the impact from the cyclone — now a category 5 system — is expected to be more life-threatening than any cyclone in recent generations. Read more on Australia's cyclone Yasi.
