Tuesday, 5 Oct 2010

Dollar Erases Yesterday's Gains

Yesterday's gains in the greenback quickly disappeared following service data. The euro, pound, yen, and Swiss franc were all stronger versus the dollar. The Aussie dollar lagged following decision by the Bank of Australia to hold Australian interest rates steady.

Weakening the dollar versus the euro and the pound were better than expected European Services PMI and British Services PMI. The euro erased its losses versus the dollar as the pair climbed as high as 1.3793. The GBP/USD climbed as high as 1.5913.

The Swiss franc reached a new low versus the dollar at 0.9657 as Swiss inflation stayed low at 0%.

The Aussie dollar was down following the decision by the Australian central bank not to hike interest rates. The market had widely expected a rise to a rate of 4.75% and had priced this into the AUD/USD which has fallen to 0.96.

Japan surprised the market by reducing interest rates by the Bank of Japan and the announcement of a fund to begin buying bonds and commercial paper. Following the unexpected move, the USD/JPY rose to its highest level in a week at 83.97 before retracing its gains and trading lower at 83.30.

Traders will be eyeing the ISM Non-Manufacturing PMI data release at 14:00 GMT to drive trading during the New York trading session.