LONDON (AFX) - The dollar was under pressure in midday trade amid fading hopes that the US Federal Open Market Committee will reduce rates at its much-awaited meeting tomorrow, dealers said.There was also some caution ahead of the US Securities Exchange Commission's August 14 deadline for big US companies to certify their financial statements, they added."Tentative signs of stability have now emerged but the dollar has two formidable hurdles to negotiate this week in the form of the FOMC rate decision and the SEC requirement for CEOs to certify their corporate accounts," Steve Pearson, head of currency strategy at HBOS Treasury Services said.
Hopes for a rate cut have been scaled back and are weighing on the dollar, Chris Furness at 4CAST said."It is largely positional movements leading to a squeeze on the dollar," he added.But there are also other interesting developments brewing, he said, citing the large coupon payments and redemption of US Treasuries on Thursday.With the ball park figure for the total just under 50 bln usd, any repatriation may well affect the dollar, Furness said, adding that Japanese investors are substantial holders of US Treasuries.
"Traditionally they do repatriate interest payments," Furness said.Accordingly, the yen was higher against the dollar and across the board. But US data flow is heavy during the week with retail sales, industrial production, Philly Fed survey, housing starts and consumer confidence all scheduled. Asset markets will be alert for signs of improvement after recent weakness in key leading indicators, dealers said.
Sterling was mixed after indications that there is no real build up in inflationary pressure. UK manufacturers' raw material costs in July reversed falls seen over the past two months, rising by a faster-than-expected 0.6 pct from June. However, there was little indication that the higher input prices were feeding through the system as output prices of manufactured products remained unchanged from June and were up 0.3 pct from a year ago."Overall, this is a very consensus report, but suggests that retail price inflation will continue to benefit going forward from the weakness in upstream prices," Ciaran Barr, economist at Deurtsche Bank said.