NEW YORK (Dow Jones)--The dollar was ahead of most rivals Friday but gave up some of its overnight gains as U.S. equities ticked higher.
The greenback began its rise overnight on the back of comments by Federal Reserve Chairman Ben Bernanke regarding the eventual tightening of U.S. monetary policy.
A better-than-expected report on the U.S. trade balance in August also boosted the dollar, sending the greenback in New York morning trading to its intraday peak against the euro. The common currency has since taken back some lost ground.
Currencies likely will remain in a tight range for the remainder of the session as investors consolidate their positions ahead of next week's slew of corporate earnings reports, said Jessica Hoversen, fixed income and foreign exchange analyst at MF Global in Chicago.
If companies continue to report positive results, the euro should resume its advance on the dollar, Hoversen said.
Late morning, the euro was at $1.4747 from $1.4790 on Thursday, according to EBS via CQG. The dollar was at Y89.53 from Y88.42. The euro was at Y132.03 from Y130.75. The U.K. pound was at $1.5922 from $1.6080, while the dollar was at CHF1.0293 from CHF1.0264.
Earlier Friday, the Commerce Department said the U.S. trade deficit unexpectedly narrowed for the first time in four months, with exports rising to their highest level of the year and imports easing despite higher oil prices. The weak dollar aided the narrowing in the trade balance.
After falling to its lowest level in 14 months on Thursday, the U.S. Dollar Index recovered to its recent trading range by early morning in New York. The index measures the dollar against a trade-weighted basket of currencies. It had fallen to 75.76 on Thursday; it stood at 76.19 late morning Friday in New York.
The dollar was also higher against the yen Friday as general dollar strength lifted the greenback against the Japanese currency, analysts said.
Bernanke said in a Thursday evening speech that the central bank would be ready to tighten monetary policy and shrink its bloated balance sheet once the economy improves.
Loose monetary policy and ultra-low interest rates encourage investors to use the low-yielding dollar to fund bets in riskier assets, such as commodity-backed currencies like the Australian dollar.
While the Fed continues to believe that loose monetary policy will be needed for an extended time, it must be ready to tighten policy as the recovery takes hold, Bernanke said.
However, the dollar's rebound on the back of Bernanke's comments isn't likely to last, analysts said.
"In reality, the Fed cannot afford to raise rates any time soon, and it seems that such comments are mostly aimed at quashing any budding inflation expectations that might lead to higher long-term rates before the economy can handle them. As such the effect should be short-lived and we expect [the euro] to continue its march higher," said BNP Paribas analysts in a research note.
The dollar lost ground Thursday after a perfect storm of events, including better-than-expected U.S. corporate earnings, central bank meetings without surprises and rising equities teamed to heighten risk appetite.
European Central Bank President Jean-Claude Trichet on Thursday expressed support for a strong-dollar policy. He didn't send any signals to tamp down euro strength against the dollar, as some analysts had expected.
Other central banks did express concern about the dollar's weakness, with several Asian monetary authorities - including Hong Kong's - intervening in the market Thursday.
Separately, New Zealand Finance Minister Bill English said that his country's dollar was overvalued and that the government would employ fiscal discipline to keep interest rates low to reduce the pressure on the currency. The New Zealand dollar was at $0.7350 early Friday, down from Thursday's peaks, which were the highest against the U.S. dollar since the end of July 2008.
The Canadian dollar was substantially higher Friday morning, reaching a new 12-month top after Canadian jobs data for September sharply outpaced expectations. The U.S. dollar traded at C$1.0430, from C$1.0510 late Thursday. It earlier hit a session low of C$1.0425, its lowest level since late-September 2008
The greenback began its rise overnight on the back of comments by Federal Reserve Chairman Ben Bernanke regarding the eventual tightening of U.S. monetary policy.
A better-than-expected report on the U.S. trade balance in August also boosted the dollar, sending the greenback in New York morning trading to its intraday peak against the euro. The common currency has since taken back some lost ground.
Currencies likely will remain in a tight range for the remainder of the session as investors consolidate their positions ahead of next week's slew of corporate earnings reports, said Jessica Hoversen, fixed income and foreign exchange analyst at MF Global in Chicago.
If companies continue to report positive results, the euro should resume its advance on the dollar, Hoversen said.
Late morning, the euro was at $1.4747 from $1.4790 on Thursday, according to EBS via CQG. The dollar was at Y89.53 from Y88.42. The euro was at Y132.03 from Y130.75. The U.K. pound was at $1.5922 from $1.6080, while the dollar was at CHF1.0293 from CHF1.0264.
Earlier Friday, the Commerce Department said the U.S. trade deficit unexpectedly narrowed for the first time in four months, with exports rising to their highest level of the year and imports easing despite higher oil prices. The weak dollar aided the narrowing in the trade balance.
After falling to its lowest level in 14 months on Thursday, the U.S. Dollar Index recovered to its recent trading range by early morning in New York. The index measures the dollar against a trade-weighted basket of currencies. It had fallen to 75.76 on Thursday; it stood at 76.19 late morning Friday in New York.
The dollar was also higher against the yen Friday as general dollar strength lifted the greenback against the Japanese currency, analysts said.
Bernanke said in a Thursday evening speech that the central bank would be ready to tighten monetary policy and shrink its bloated balance sheet once the economy improves.
Loose monetary policy and ultra-low interest rates encourage investors to use the low-yielding dollar to fund bets in riskier assets, such as commodity-backed currencies like the Australian dollar.
While the Fed continues to believe that loose monetary policy will be needed for an extended time, it must be ready to tighten policy as the recovery takes hold, Bernanke said.
However, the dollar's rebound on the back of Bernanke's comments isn't likely to last, analysts said.
"In reality, the Fed cannot afford to raise rates any time soon, and it seems that such comments are mostly aimed at quashing any budding inflation expectations that might lead to higher long-term rates before the economy can handle them. As such the effect should be short-lived and we expect [the euro] to continue its march higher," said BNP Paribas analysts in a research note.
The dollar lost ground Thursday after a perfect storm of events, including better-than-expected U.S. corporate earnings, central bank meetings without surprises and rising equities teamed to heighten risk appetite.
European Central Bank President Jean-Claude Trichet on Thursday expressed support for a strong-dollar policy. He didn't send any signals to tamp down euro strength against the dollar, as some analysts had expected.
Other central banks did express concern about the dollar's weakness, with several Asian monetary authorities - including Hong Kong's - intervening in the market Thursday.
Separately, New Zealand Finance Minister Bill English said that his country's dollar was overvalued and that the government would employ fiscal discipline to keep interest rates low to reduce the pressure on the currency. The New Zealand dollar was at $0.7350 early Friday, down from Thursday's peaks, which were the highest against the U.S. dollar since the end of July 2008.
The Canadian dollar was substantially higher Friday morning, reaching a new 12-month top after Canadian jobs data for September sharply outpaced expectations. The U.S. dollar traded at C$1.0430, from C$1.0510 late Thursday. It earlier hit a session low of C$1.0425, its lowest level since late-September 2008
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