SINGAPORE, July 21 (Reuters) - The dollar stood on the verge
of fresh year-to-date peaks on Wednesday, as jitters about
surging virus infections buttressed gains built on higher
interest rate expectations, with investors waiting on the
European Central Bank for their next cue.
The euro touched its lowest since April on Tuesday
and, at $1.1772 in Asia, was not far above the year's nadir at
$1.1704. It might find support if the ECB fails to meet
expectations for a dovish tweak to rates guidance at its
Thursday meeting. But if that is delivered, it could open the
way for further weakness.
"The implication is the ECB's monetary policy will now
remain ultra easy for even longer which is a headwind to the
euro," said Commonwealth Bank of Australia strategist Kim Mundy.
Other majors likewise faced difficulty escaping multi-month
lows leaving sterling, the Canadian, Australia and New Zealand
dollars to trade under pressure in the Asia session.
"The U.S. dollar does seem to have quite an undertow of
support," said Westpac analyst Sean Callow in Sydney.
The dollar index added 0.1% to 93.033 and could test
its March peak of 93.439, Callow said, as the currency seemed to
find help from risk aversion when investors were nervous and
support from rate hike expectations when they were not.
"The general mood on the dollar looks as though it would
take a lot to derail the basic narrative of the dollar being in
fairly good shape from here to the Jackson Hole conference," he
added, referring to the August symposium in Wyoming where the
Federal Reserve may announce tapering of its bond purchases.
"For the time being you'd probably just prefer to keep long
dollars for the next few weeks."
Elsewhere the Australian dollar took a knock from soft
retail sales data and the expectation of more weakness in the
near term as much of the country is locked down to slow
coronavirus transmission. It was off 0.3% at $0.7310.
The New Zealand dollar was parked at $0.6913 and
the Canadian dollar began to hand back some of the
bounce it managed overnight.
The dollar was steady against the safe-haven yen, which has
also been advancing broadly while concerns grow about surging
global coronavirus infections and the obstacle they could
present to economies on the path to pandemic recovery.
The yen was last at 109.87 per dollar and 129.37
The seven-day average of daily new infections is at its
highest since May and the corresponding average of reported
deaths is also on the rise.
Sterling faces pressure as cases soar while England drops
most social curbs.
Sterling was last at $1.3616, below its 20-day and
200-day moving averages and just a fraction over Tuesday's
five-month low. The Singapore dollar also traded near
Tuesday's eight-month low after the reimposition of some curbs.
With a light data calendar on Wednesday, Thursday's ECB
meeting looms largest on the horizon. A dovish tone is expected
after President Christine Lagarde foreshadowed a guidance tweak
during an interview last week.
The ECB announced a new strategy which allows the bank to
tolerate inflation above its 2% target and Lagarde said policy
guidance would be revisited to demonstrate the bank's commitment
to the new goal.
"No change in the ECB bias is unlikely to be enough to send
the euro higher," analysts at ING said in a note. "At the same
time, any ECB shift towards the dovish interpretation of the
strategic review would underscore the recent downward
In the digital space, cryptocurrencies clawed back Tuesday's
losses to drag bitcoin from a one-month low and back
(Reporting by Tom Westbrook; Editing by Ana Nicolaci da Costa &