The dollar took a breather
in Asia on Thursday but remained near a 3-1/2-month high against a basket of
currencies hit in the wake of Britain's stunning vote to exit from the European
Union, while the battered sterling continued to struggle.
The dollar index, which
tracks the greenback against a basket of six major rivals, edged up 0.1 percent
to 95.836 .DXY, on track for a monthly loss of 0.1 percent.
While the U.S. currency
mostly benefited from the massive wave of risk aversion that crashed over
global markets after the Brexit vote, fading expectations of a U.S. interest
rates this year have stolen some of its thunder.
Interest rate futures
suggested traders saw the Fed holding policy steady - or even cutting rates -
through at least early 2018.
The dollar index rose as
high as 96.705 on Monday, when the pound plumbed 31-year lows after the results
of the UK vote on Friday.
Sterling was down 0.2
percent at $1.3395 GBP=D4, well above Monday's nadir of $1.3122 but still
poised to lose more than 7 percent for the month.
Sterling "has come a
long way, and there is still a lot of uncertainty," said Sue Trinh, senior
currency strategist at RBC Capital Markets in Hong Kong.
"We've got month-end
shenanigans as well, with some fund managers rebalancing their hedges, so that
could also add to the volatility today," she said.
The euro was nearly flat
against the pound at 82.85 pence EURGBP=D4 edging away from Monday's high of 83.80,
which was its loftiest peak in over than two years.
"The odds may be
against them but investors are hoping that the worst is over for currencies and
equities and the gaps on Friday will be filled," Kathy Lien, managing
director of foreign exchange strategy at BK Asset Management, wrote in a note
to clients.
"But considering
there's been had no additional clarity on the terms of Brexit or the outlook
for the UK economy and global economy since Britain's decision to leave the
European Union on Friday, we don't see fundamental support for the recent
moves," she said.
Chaos also continued in
Britain's political arena, as both main opposition Labour Party and ruling
Conservative Party headed for leadership battles.
Japan's foreign ministry
said Prime Minister Shinzo Abe would have separate phone talks with British
Prime Minister David Cameron and German Chancellor Angela Merkel later on
Thursday.
The euro remained under
pressure, down 0.2 percent at $1.1101 EUR=, but remained well above its 3
1/2-month low of $1.0912 hit on Friday last week. It was down 0.3 percent for
the month.
Against its perceived
safe-haven Japanese counterpart, the dollar was steady at 102.80 yen JPY=, well
above its 2-1/2-year low of 99.00 hit in volatile trade on Friday.
It was still on track to
shed more than 7 percent for the month.
The yen tends to appreciate
sharply in times of global risk, creating headaches for the Japanese government
and threatening to push the country back into recession.
Data released earlier in the
session showed that Japan's industrial output fell in May at the fastest rate
in three months, highlighting concerns about falling exports and doubts about
weak consumer spending.
The Australian dollar AUD=D4
fell 0.3 percent to $0.7433, but was still well off its post-Brexit lows. The
outcome of the British vote on Friday pushed it as low as $0.7305 from $0.7650
earlier that session.
The Aussie was still up 2.8
percent for June.
Credit:Reuters
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