Dollar up slightly, other currencies see small moves ahead of central bank deluge
Investing.com — The U.S. dollar ticked up slightly on Wednesday, while other major currencies such as the euro, sterling, and the yen saw small moves. With a light U.S. economic calendar and the Federal Reserve in a blackout period ahead of its monetary policy decision next week, currency market participants had few catalysts in terms of news.
Meanwhile, oil ticked up as traders assessed possible diplomatic progress between Russia and Ukraine against a lack of any major breakthroughs in a meeting between Pakistani and Iranian officials.
The U.S. dollar index, which tracks the greenback against a basket of six major peers, climbed 0.1% to 101.78.
Euro marginally lower on French civil unrest
The euro extended a slight rebound into a second straight session, climbing 0.1% to $1.1234. However, the single currency remained on fragile footing, extending its monthly decline to nearly 1% as FX desks priced in persistent political and fiscal friction in the eurozone’s second-largest economy.
The French government confirmed Tuesday it will deploy military personnel alongside police forces to establish a major security perimeter ahead of fresh nationwide protests scheduled for Saturday, acknowledging official shortcomings in containing violent weekend riots across Paris and regional hubs.
Persistent social instability has severely diminished prospects for domestic fiscal consolidation, pushing French 10-year borrowing costs toward 24-year highs and widening sovereign credit default swap (CDS) spreads against benchmark German Bunds to multi-year peaks.
“How can the debt sell-off in France get so bad so fast? One under-appreciated aspect in what’s happening is that France got big inflows into its debt from foreign investors over the summer, so there’s now a positioning unwind as these folks scale out of their positions,” Robin Brooks, senior fellow in economic studies at the Brookings Institution, said.
“So – while fiscal dysfunction and political paralysis are ‘old’ news – this has to be seen in the context of this positioning overhang, which is now unwinding,” he added.
Elsewhere in Europe, the sterling inched up by 0.1% to $1.3396, a day after a 0.6% surge. That advance had been sparked by mixed labor market data which built a case for rate hikes from the Bank of England.
