The dollar managed to regain some ground in today’s trading, after the steepest daily drop of the dollar index in more than a year during the previous day. There was widespread profit-taking on the dollar during Monday’s trading and that continued to a certain extent during today’s Asian session.
According to analysts, this was attributed to excessive speculative positions in favor of a dollar rise as well as profit taking by existing longs. Euro / dollar made a high of 1.2673 late in the US session and more recently traded around 1.2630. Dollar / yen fell as low as 108.50 as the Bank of Japan left its monthly quantitative easing targets of 60-70 trillion yen per month unchanged (around 600 billion dollars). Dollar / yen was trading around 108.65.
Kuroda’s comments were roughly in line with his previous stance; i.e. moderately optimistic about the Japanese economy and still expecting to achieve the 2% inflation target next year. Although he left the possibility of additional easing open, he said that would be dependent on developments and did not give the impression that additional stimulus was to be expected. One development that could help the Japanese economy is the recent weakening of the Japanese yen, as Kuroda said the BoJ would be monitoring FX movements.
Another key central bank meeting was that of the Reserve Bank of Australia. The RBA left its key interest rate unchanged at 2.50% and reiterated that there would likely be a period of stability for Australian interest rates. The RBA statement also continued to characterize the exchange rate as “historically high”.
Finally, German industrial output dropped significantly more-than-expected during August (-4% actual vs -1.5% expected). This comes after the previous day’s also dismal German industrial orders number and does raise some questions about the health of Europe’s largest economy.
UK industrial output as well as US jobs openings data are on tap to be released later in the day.