The U.S. dollar trended lower against most of its major rivals overnight as American equity futures ticked higher and on speculation the Federal Reserve will signal today its moving toward another round of asset purchases to spur growth. Fed officials are probably engineering a further round of asset purchases, while they are unlikely to announce a decision at the end of their two-day meeting this afternoon, according to economists surveyed by Bloomberg. 69% say Chairman Bernanke will embark on a third round of QE2, with 36% predicting the move in the first quarter of next year, according to a poll taken last week. Meanwhile, the economic docket showed that companies added more workers in October, according to a private report based on payrolls. The 110K increase beat expectations of a 100K gain, ADP Employer Services said today. The print may foreshadow a stronger Non-farm payrolls number on Friday. Nevertheless, expect market participants to focus on the Fed’s interest rate decision at 12:30 p.m. EST.
The Euro gained modestly against the U.S. dollar, pulling back from some of its steep losses from the first two days of the week. The Euro fell yesterday after Greek Prime Minister Papandreou, originally from Saint Paul, Minnesota, surprised the market by announcing that he was seeking a referendum on the Greek bailout deal. The euro found support after a Greek official said the Cabinet gave Papandreou unanimous backing for his referendum plans. Spokesperson Elias Mosialos said the referendum will be held “as soon as possible” and the vote of confidence in Parliament is also scheduled to begin today. Papandreou will now travel to Cannes, France, today to brief the German Chancellor and the French President on developments in Greece. Group of 20 leaders will meet in the French resort tomorrow to discuss the debt crisis.
The Japanese yen strengthened against the U.S. dollar after a Bank of Japan board member warned that the yen may strengthen further, two days after the government intervened to protect investors by weakening the currency. “We could see the yen, regarded as a relatively safe currency, rise even further” should investors’ risk aversion intensify over a deepening European crisis, the official, Sayuri Shirai, said in a speech today. Authorities sold yen on Monday after the currency surged to its highest level since World War II.
The British pound rose against the greenback as European stocks rose and a gauge of construction output increased more than expected. The gauge based on a survey of purchasing managers unexpectedly rose in October to 53.9 from 50.1 in September, Markit and Chartered Institute of Purchasing and Supply in London said in a report today. The print beat a median forecast of 50.
