The dollar marched further upward Tuesday ahead of U.S. manufacturing data due later in the day. The ICE dollar index , which tracks the U.S. currency against six rivals, extended its gains from Monday, rising to 82.258 from 82.118. The WSJ Dollar Index was at 74.49, up from 74.40 late Monday. "The U.S. dollar continues to find support amidst persistent speculation over early [quantitative easing]-tapering" by the U.S. Federal Reserve, analysts at ICICI Bank wrote Tuesday. They pointed to the Institute for Supply Management's August manufacturing index as the next key clue as to when the Fed will slow the pace of its bond purchases. The data is due at 10 a.m. U.S. Eastern time. Economists polled by MarketWatch expect on average that the ISM index will ease to 54.0% from its 13-month peak of 55.5% in July. ICICI Bank put Tuesday's support level for the ICE dollar index at 82.00, with resistance at 82.65, while Royal Bank of Canada strategist Michael Turner noted that the index was nearing its 100-day moving average at 82.39. The dollar's gain was the euro's loss, with the European unit easing to $1.3193 from $1.3217 after failing to get much of a bounce Monday from upbeat euro-zone manufacturing data. The Japanese yen also lost ground, with the dollar rising to ¥99.40 from ¥99.24 late Monday. Crédit Agricole said the dollar's gain against its Japanese counterpart came "as risk appetite improves and prospects of the implementation of a sales tax in Japan gathers steam." Japan is planning to raise its consumption tax in two stages, beginning next April, with the move expected to help shore up the nation's weak finances. "Additionally, the yield differential between the U.S. and Japanese 10-year bonds remains above [two percentage points], sufficient in our view to spur capital outflows from Japan and a weaker yen," Crédit Agricole said. In other currency action Tuesday, the British pound edged back to $1.5557 from $1.5582, while the Australian dollar bucked the trend to rise to 90.33 U.S. cents from 90.02 U.S. cents late Monday. The Australian currency's move came after the central bank held its policy interest rate steady at the record low level of 2.5%, while saying the Aussie dollar "remains at a high level." While the decision to keep the cash rate unchanged was widely expected, Su-Lin Ong of RBC said the markets may have seen "a watering down of the easing bias" after the Reserve Bank of Australia failed to include the phrase "scope to ease further," which had appeared in many recent RBA statements. Source : Marketwatch
