BOE chief's remarks add to pressure on British pound
By William L. Watts & Deborah Levine,
NEW YORK (MarketWatch) -- The U.S. dollar was lower versus most rivals Thursday, maintaining a weak tone a day after the Federal Reserve upgraded its assessment for the economy but indicated that interest rates were unlikely to rise any time soon.
Gains in the dollar may be limited ahead of the two-day meeting of Group of 20 leaders in Pittsburgh on Thursday, analysts said.
The dollar saw added pressure versus the Japanese yen, falling 0.9%, on talk of potential yen repatriation following the Japanese holiday, said T.J. Marta, founder and chief strategist at Marta on the Markets.
The dollar fell to 90.62 yen versus the Japanese unit, down from 91.13 yen in North American trade late Wednesday.
The dollar index (DXY 76.17, +0.13, +0.17%) , which measures the U.S. unit against a basket of six major currencies, recently stood at 76.188, down from 76.377 in late New York trade Wednesday.
The dollar remained higher after the U.S. Labor Department said first-time filings for state unemployment benefits fell sharply in the latest week to the lowest level since July. See more on jobless claims.
Still to come Thursday is a report on existing-home sales.
"One of the main agendas for the G20 Summit is the discussion of options to address global structural imbalances which would make it difficult to exclude currencies from the discussion," strategists at Brown Brothers Harriman wrote in a note.
The dollar declined late Wednesday after the Federal Reserve said economic activity has "picked up" and noted improved conditions in financial markets.
It also extended through March the timeframe for its $1.25-trillion program to buy mortgage-backed securities and its $200 billion program to buy agency debt.
The euro rose to $1.4786, up from $1.4734.
The euro posted little reaction to a continued but weaker-than-expected rise in the Ifo Institute's German-business-climate index. The index rose to 91.3 in September from 90.5 in August, coming in below forecasts for a stronger jump to 92.0. See full story.
Economists said the data still pointed to third-quarter growth for the German economy.
British pound
The British pound, meanwhile, tumbled on a combination of news reports focused on the currency's ongoing weakness. Sterling traded at $1.6181 versus the dollar, down from $1.6343 late Wednesday. The euro jumped 1.5% to 91.40 pence.
Remarks by Bank of England Governor Mervyn King to a regional newspaper published Thursday underscored the central bank's lack of concern about weakness in the pound, strategists said.
King, in an interview with the Newcastle Journal, said the pound's tumble had aided a rebalancing of the U.K. economy.
The pound had regained some ground Wednesday after minutes of the BOE's September policy meeting showed policy makers were content for now with the size of the bank's quantitative-easing program.
"But the bounce only lasted 24 hours as Mr. King once again demonstrated to the market that the BOE is perfectly content with a lower currency exchange rate and is unlikely to initiate any type of tightening into its monetary policy for the foreseeable future," said Boris Schlossberg, head of currency research at GFT.
Also, the Daily Telegraph reported that the Bank of England was set to meet with London-based economists in what the newspaper termed a "crisis" meeting designed to stem alarm and confusion over the quantitative-easing program and the weakness of the pound.
Some analysts downplayed the significance of the meeting, but noted that overall sentiment toward the pound remains bearish.
"Indeed, although there is nothing unusual in the BOE calling a meeting with economists to clarify policy, as looks to be the case, the sterling-negative sentiment continues to build, especially as the BOE appears unconcerned by the currency weakness at this stage," wrote strategists at BNP Paribas.
