CURRENCIES: Dollar's Bounce Drags Rivals Across The Board
November 20 2018 - 3:54PM
Dow Jones News
By Anneken Tappe, MarketWatch
BOE would be a sideshow in case of hard Brexit: Carney
The U.S. dollar Tuesday bounced back from a modestly negative
performance at the start of the week, in turn putting pressure on a
pair of major rivals, the euro and British pound.
The ICE U.S. Dollar Index was up 0.7% at 96.827.
Dollar strength weighed on risk-sensitive currencies, including
emerging markets, which declined across the board. The Turkish lira
saw the steepest decline, with one dollar buying 5.3875 lira,
compared with 5.3136 lira late Monday in New York. In developed
markets, the Australian dollar -- risk and global growth bellwether
-- was sharply down versus the buck, buying $0.7220, compared with
$0.7293 late Monday in New York.
On the Brexit front, Bank of England Gov. Mark Carney testified
before parliament on the U.K.'s inflation and economic outlook,
saying that if there was a hard Brexit in March of next year,
monetary policy considerations were secondary to the effect such an
outcome would have on the economy.
"This is not the financial crisis round two, where the Bank of
England and other central banks were center stage. This is a real
economy shock and therefore central banks have a role but we're
more of a sideshow," Carney said.
Meanwhile, Prime Minister Theresa May remains under pressure
over her Brexit plan though after much drama and anticipation last
week, she has yet to face a leadership challenge from within her
own party.
Don't miss:Here's how Brexit turmoil could become a problem for
U.S. and global investors
(http://www.marketwatch.com/story/heres-why-brexit-turmoil-is-a-source-of-worry-for-us-investors-2018-11-15)
All this has been weighing on the pound , but with limited news
flow, sterling was only slightly weaker, buying $1.2787, compared
with $1.2851 late Monday in New York.
From the European point of view, the Brexit negotiations also
got a bit trickier on Tuesday, as Spain, France and the Netherlands
expressed concerns about the proposed Brexit deal. Spain in
particular was worried about the treatment of Gibraltar, a
peninsula on Spain's southern coast that is a British territory.
Spain has claimed sovereignty over Gibraltar.
The euro slipped to $1.1368 on Tuesday, versus $1.1455 late
Monday. The impending European Commission response to Italy and its
budget plan, which Brussels says violates EU fiscal rules, is due
Wednesday. Italian bond yields rose Tuesday, leaving the closely
watched spread with German bond yields near a five-year high
(http://www.marketwatch.com/story/treasury-yields-struggle-for-direction-amid-global-stock-selloff-2018-11-20),
before pulling back.
Read:Italy is 'the No. 1 risk factor in the fourth quarter' for
European investments
(http://www.marketwatch.com/story/italy-is-the-no-1-risk-factor-in-the-fourth-quarter-for-european-investments-2018-10-23)
Elsewhere, Bank of Japan Gov. Haruhiko Kuroda said that negative
interest rates were a necessary part of the central bank's monetary
policy, and that Japan was unlikely to hit its inflation target
next year.
Japan is considered to be one of the last developed market
central banks to normalize policy and abandon its ultralow interest
rates.
The dollar hit a three-week low versus the Japanese yen earlier
in the session, before recovering, last fetching Yen112.73 from
Yen112.55 late Monday in New York.
(END) Dow Jones Newswires
November 20, 2018 15:39 ET (20:39 GMT)
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