Tags: FOREX-Feds Bullard Prods Dollar Higher | Eyes on U.S.inflation

FOREX-Fed's Bullard Prods Dollar Higher, Eyes on U.S.inflation

Thursday, 26 February 2015 08:41 AM

* U.S. CPI seen as a risk to the dollar

* Weak capex enhances case for more RBA easing, hurts Aussie

* Little impact from European data

* New Zealand shows surprise trade surplus (Recasts after comments by St Louis Fed chief)

By Patrick Graham and Anirban Nag

LONDON, Feb 26 (Reuters) - The dollar gained almost half a percent against the euro around midday in Europe on Thursday after St Louis Federal Reserve chief James Bullard said the strong dollar was having only a marginal impact on U.S. monetary policy and economy.

Bullard, speaking on CNBC, also said the U.S. central bank, where he is currently a non-voter on policy, should next month drop its reference to "patience" in describing its approach to tightening monetary policy.

The dollar strengthened to a day's high of $1.1315 per euro in response but remains bang in the middle of ranges it has held against the single currency for the past month, prompting some doubts over how fast further rises may arrive.

"Some of the euro stops have gone on this," one London-based dealer said.

The Australian and New Zealand dollars had been the main movers among major currencies in Asian and European trading, pushed in opposite directions by contrasting signals on the health of two economies which are struggling.

The Aussie fell as much as half a percent against the dollar, the euro and yen before recovering some poise in morning trade in Europe, after unexpectedly weak business investment numbers in an economy striving for growth.

The kiwi dollar by contrast gained 0.4 percent against both the dollar and yen after data showed a surprise surplus on trade.

"In Australia people knew the mining numbers would be weak but were expecting construction investment to make up for that. When it didn't we saw the reaction on the (Aussie) dollar," said Adam Myers, European head of FX strategy at Credit Agricole in London.

There was little impact on the euro from a handful of European data releases, including signs that falls in bank lending may finally be coming to an end.

Two much-awaited days of testimony from Fed chief Janet Yellen have done little to move on the debate over when U.S. rates will rise, if anything pushing expectations back to later in the second half of this year.

"Janet Yellen has done a fair bit in recent days both to help stop the dollar's advance and to suck volatility out of the FX market," Kit Juckes, a strategist with French bank Societe Generale in London, said.

"The prospect of a shift in Fed policy promises a move to a sustained period of higher volatility, but the talk of patience, and the emphasis on flexibility when the Fed finally acts, soften that effect."

The U.S. inflation numbers are due at 1330 GMT. "If we get a surprise on CPI, if the core is lower for example, then the euro is going to go higher," Myers said.

"There are a lot of people who have been short (of euros) for a while and are just going 'come on, come on'. A move higher on the euro and you will see more of them close out."

The dollar was steady at 118.88 yen. (Editing by Toby Chopra and Jane Merriman)

© 2019 Thomson/Reuters. All rights reserved.

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FOREX-Fed's Bullard Prods Dollar Higher, Eyes on U.S.inflation
FOREX-Feds Bullard Prods Dollar Higher, Eyes on U.S.inflation
Thursday, 26 February 2015 08:41 AM
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