The dollar and the euro stayed within a tight range Tuesday, as investors waited for further developments in efforts to restore eurozone finances ahead of meetings of major central banks.
The dollar stood at 78.04 yen, nearly flat from 77.98 yen in New York Monday afternoon. The euro was at $1.2892 and 100.61 yen, little changed from $1.2887 and 100.51 yen in New York.
The markets were waiting for headlines from Greece and Spain, as well as the results of a Moody’s review that could see Spain downgraded to junk status, Kengo Suzuki, forex strategist at Mizuho Securities, told Dow Jones Newswires.
After Spain unveiled an austerity budget for 2013, some EU officials expressed their resolve to help the country if it seeks a bailout, as eurozone finance ministers gather for a meeting on October 8.
Rising hopes for a Spanish bailout are also expected to be discussed at a European Union summit on October 18-19. The market will also be watching a policy decision later Tuesday by the Reserve Bank of Australia (RBA).
Some analysts say the market has factored in a rate cut, while others expected the bank to keep the rate steady.
“While it is a close call, we believe that there will be no change, on balance,” said Emma Lawson, currency strategist at National Australia Bank. “However… no change is likely to lead to a bounce in the Australian dollar, something that is more likely to drive the RBA to further easing.”
Suzuki, expecting the RBA to keep its current rate, said there will also be a focus on Australian central bankers making “any comments regarding a slowdown in the Chinese economy”. The market will also be awaiting other upcoming central bank policy meetings.
The Bank of Japan is expected to take no fresh action at its meeting scheduled for Thursday and Friday.
But the risk has increased for rhetorical interventions to tame the strong yen under the new government of Prime Minister Yoshihiko Noda that was launched Monday, Lawson said. “The risks remain for more aggressive easing or direct forms of FX intervention.”
New Finance Minister Koriki Jojima “appears less keen on direct foreign bond purchases than… new economy minister (Seiji) Maehara,” she said, adding that the market needs more time to digest their policy inclinations.
