Dollar rises ahead of ECB policy decision

by Jonathan Adams
ECB policy

The U.S. Dollar Index edged up 0.02% to 92.668

The dollar was up on Thursday morning in Asia ahead of the latest European Central Bank (ECB) policy decision. Concerns about COVID-19’s impact on economic recovery also gave the safe-haven asset a small boost.

The U.S. Dollar Index edged up 0.02% to 92.668 by 2:54 AM GMT.

The USD/JPY pair inched down 0.08% to 110.14.

The AUD/USD pair edged down 0.07% to 0.7359 and the NZD/USD pair edged down 0.03% to 0.7092.

The USD/CNY pair inched down 0.01% to 6.4604. Chinese inflation data released earlier in the day showed that the consumer price index grew 0.1% month-on-month and 0.8% year-on-year in August. The producer price index grew 9.5% year-on-year.

The GBP/USD pair inched up 0.02% to 1.3771.

New York Federal Reserve Bank President John Williams’s comment on Wednesday that more progress is needed in the job market before asset tapering can begin gave risk sentiment a small boost. However, the Fed is widely expected not to announce asset tapering anytime soon after the weaker-than-expected U.S. jobs report released during the previous week.

Meanwhile, the ECB is likely to begin asset tapering when it hands down its policy decision later in the day. It could reduce its buying under the pandemic emergency purchase program (PEPP) to EUR60 billion ($75.96 billion) monthly from the current EUR80 billion ($94.51 billion), before a further drop in early 2022 and the scheme’s expiry in March 2022.

However, some investors expect the ECB to continue monetary support for much longer even after PEPP ends.

If the ECB board is going to discuss reducing its bond purchase under PEPP, it will make sure that it will continue with its conventional asset purchase program. So it is likely to be a policy change with a caveat. The euro may end up getting little boost in the end, Sumitomo Mitsui Bank chief strategist Daisuke Uno told Reuters.

The euro dropped to $1.1819, continuing a retreat from a two-month high of $1.1909 hit during the previous week.



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