The dollar was about 0.2 percent from a six-week low versus the euro before Federal Reserve Chair Janet Yellen speaks today, while Australia’s currency tumbled after the trade deficit widened more than economists forecast.
The greenback held a five-day decline against an index of major peers after a report yesterday showed a gauge of U.S. manufacturing rose less than analysts projected. New Zealand’s dollar retreated from a near a three-year high after milk powder prices declined at an auction. The European Central Bank sets policy tomorrow as expectations for currency swings reached a record low.
“The U.S. data has been weakening somewhat, and that is accelerating dollar selling,” said Yuki Sakasai, a foreign-exchange strategist at Barclays in New York. “We need some hawkish signals from the Fed to change that trend.”
The dollar was little changed at $1.3677 per euro as of 8:21 a.m. London time from yesterday, when it touched $1.37, the weakest since May 21. The U.S. currency was little changed at 101.50 yen. The euro was at 138.81 yen, from 138.88 yen yesterday.
The Aussie dropped 0.4 percent to 94.63 U.S. cents after yesterday touching 95.05 cents, the strongest since Nov. 7.
Yellen will give a speech at the International Monetary Fund today in Washington. Traders are pricing in a 42 percent chance that the Fed raises borrowing costs from near zero by June 2015, down from 51 percent odds before Yellen reiterated on June 18 that rates would stay low for a “considerable time.”
Market participants want “clarification on the process and just what is most important to the Fed,” Emma Lawson, a senior currency strategist at National Australia Bank Ltd. in Sydney, wrote in a research note dated today. “Of course she may continue to provide little new detail and there is disappointment once again. That should see the USD lower.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, was little changed at 1,002.94 from 1,002.67 yesterday, the lowest close since May 6.
Employment at U.S. companies increased by 205,000 workers in June from May, according to the median estimate of economists in a Bloomberg News survey before a report from Roseland, New Jersey-based ADP Research Institute today. A July 3 Labor Department report will show a 215,000 jobs gain, a separate Bloomberg survey predicts.
“I don’t think the U.S. jobs data will trail the market’s expectations,” said Masakazu Sato, a Tokyo-based currency adviser at Gaitame Online Co. “Stocks look firm and sentiment is slanted to more risk taking,” underpinning dollar-yen.
Australia’s dollar fell the most among major peers after the statistics bureau reported the trade deficit expanded to A$1.9 billion in May, matching the largest since November 2012, and almost 10 times wider than the A$200 million shortfall predicted by economists in a Bloomberg survey.
Outbound shipments shrank 5 percent from the previous month. Prices of iron ore, Australia’s biggest export, fell 30 percent in the first two quarters, according to data from The Steel Index Ltd.
“The declines that we’re seeing in some of our bulk commodity prices are feeding through into the trade numbers,” said Besa Deda, Sydney-based chief economist at St. George Bank Ltd. “It was a surprise outcome. The Australian dollar has come under downward pressure on the back of that.”
New Zealand’s dollar declined 0.1 percent to 87.63 U.S. cents. It reached 87.94 cents on June 27, the most since a post-float record of 88.43 in August 2011.
Whole milk powder prices sank 5.4 percent at auction yesterday, GlobalDairyTrade results showed, bringing the decline since a peak in February to 31 percent.
“Further falls in the GlobalDairyTrade auction raise concerns over the income NZ Inc. will receive from dairy this year,” Con Williams, a rural economist at ANZ Bank New Zealand Ltd., and Sam Tuck, senior currency strategist at the lender, wrote in a note today. “Continued price falls are removing a leg of support from the NZD.”
Deutsche Bank AG’s FX Volatility Index was at 5.24 percent, the lowest closing level in figures dating back to August 2001.
(An earlier version of this story was corrected because the date of Yellen’s comment in June was incorrect.)