The dollar edged lower in early Tuesday trading, with the yen higher after Japan's central bank offered no new easing moves in its latest policy decision. The Japanese yen gained ground after the Bank of Japan disappointed some market participants who had wanted it to extend the duration on its ultra-low-interest loans to banks. The dollar slumped following the decision, quickly dropping to ¥97.94 from ¥98.69 moments ahead of the decision. However, the greenback later pared its losses, rising back to ¥98.30, though still below its ¥98.64 level late Monday in North America. While the dollar is still up more than 13% against the yen this year, it has come off significantly from its late-May highs above ¥103, which it made on expectations the Federal Reserve would soon begin paring back its aggressive bond-buying operations. While the yen rose, the Australian dollar went the other way, slipping to 94.25 U.S. cents from late Monday's 94.59 U.S. cents, after a National Australia Bank survey out Tuesday showed business sentiment remained negative in May. The Aussie has marched steadily lower in recent weeks, after having lost parity with the U.S. dollar in mid-May. But Crédit Agricole strategists said Tuesday that the currency is oversold and could soon rebound. "Going forward, we expect [the Australian dollar's] downside to become increasingly limited from current levels and advise against speculating on much more downside," they wrote, citing improving risk sentiment as a factor in the currency's favor. The also said the Aussie could benefit from dashed hopes surrounding the Reserve Bank of Australia (RBA). "Market expectations for two more interest-rate cuts by the RBA over the coming 12 months may prove excessive, unless domestic growth conditions weaken considerably further," they said. Meanwhile, the U.S. dollar traded broadly lower, given the rise in the yen and some of the European majors. The ICE dollar index — which tracks the greenback against six rivals — fell to 81.548 from 81.667 late Monday, while the WSJ Dollar Index — which uses a slightly wider comparison basket — dropped to 73.66 from 73.71. Those moves came as the euro rose to $1.3271 from $1.3254, and the British pound improved modestly to $1.5583 from $1.5571. The euro's advance came after European Central Bank President Mario Draghi sounded a somewhat hawkish tone, telling German state television that the central bank wouldn't buy bonds from euro-zone members just to keep them solvent, Dow Jones Newswires reported. He made the remarks as Germany's constitutional court was set to debate whether the ECB's Outright Monetary Transactions — a yet-to-be-used program to buy bonds from struggling euro-bloc nations — was allowable under German law. In the interview, Draghi said that "the risks for German taxpayers are significantly lower today than they were a year ago," according to Dow Jones Newswires. Source : Marketwatch
