The U.S. dollar fell to its lowest level in nearly a month against the euro on Wednesday, later paring some losses, after the U.S. central bank said it would raise interest rates at a "measured" pace. Dealers said the dollar's fall had been tempered by players' reluctance to take new positions ahead of Friday's U.S. April payrolls report. Another big jobs growth number, after a surprising rise in March, would be expected to reinforce the case for an early tightening by the Fed, a move that would make holding U.S. assets more attractive and lift the currency. The Federal Reserve on Tuesday left its key rates unchanged at 1958 lows. As expected, the accompanying statement said inflation risks were balanced.
But dealers said the word "measured" appeared to stress that rates would be lifted only gradually. "The statement confirmed that accommodation will be removed, but with a deliberate reminder that that can still be a very gradual process if needed," said David Simmonds, strategist at the Royal Bank of Scotland in Singapore. At 0528 GMT the euro was at $1.2120/25 after hitting a high of $1.2140, its strongest since April 8. It ended the New York session at 1.2094. Dealers said the euro's rise had been exacerbated by stop-loss dollar sales at around $1.2120. Bombings in Athens, venue of the Olympics in August, had a brief impact on currency markets in Asia. Dealers said the euro had dropped by some 10 points before picking up again as trading normalised. The dollar rose as high as 109.56 yen before pulling back to around 109.45. The yen ended New York session at 109.33. The euro/yen cross was 132.67/77 against 132.30. Japan was closed on the final day of its Golden Week holidays, which kept Asian trading light.
PAYROLLS CAUTION
Unexpectedly strong French consumer confidence helped the euro to rise before the Federal Open Market Committee meeting ended, breaking a declining trendline that comes in at $1.1990. But dealers said after some 200 points rise in the last 24 hours and ahead of the payrolls, the euro was likely to loose some momentum.
"Two days before the payrolls report I don't think people would be looking for big directional swings," Simmonds said. Lee Boon Keng, strategist at Singapore's DBS Bank, said the market had priced in a 25 basis points increase by the Fed in August. But the Fed could disappoint if the payrolls reports before the August meeting did not show strong jobs growth, he said. "Unless those readings deliver an increase of more than 200,000 the Fed should remain patient," he said. Australia's central bank left its cash rate at 5.25 percent on Wednesday after this week's board meeting, as expected. Unlike the Fed, it makes no statement when leaving policy unchanged. The Reserve Bank of Australia (RBA) will, however, release its quarterly monetary policy statement on Friday. The Australian dollar held fairly stable on the RBA rate decision and was trading at $0.7312/17, compared with $0.7308 in New York, where it gained nearly a cent from late Australian trading levels on Tuesday. Currency bid prices at 0528GMT. All data taken from with percent change calculated from the daily U.S. close at 2130GMT.///