Dollar Up, But Gains Capped by Strong Earnings, Increasing Risk Appetite

© Reuters.

By Gina Lee

AiVIF.com – The dollar was up on Thursday morning in Asia but climbed down from multi-month highs, as strong earnings boosted global stocks and increased investor risk appetite.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.03% to 92.787 by 11:41 PM ET (3:41 AM GMT).

The USD/JPY pair edged down 0.12% to 110.13, with Japanese markets closed for a holiday.

The AUD/USD pair inched down 0.06% to 0.7353, with the Australian dollar slightly up from an eight-month low hit on Wednesday. The state of Queensland closed its border with New South Wales to curb the spread of Sydney’s COVID-19 outbreak, while the National Australia Bank (NAB) Quarterly Business Confidence index, released earlier in the day, was also a lower-than-expected 17.

The NZD/USD pair was down 0.26% to 0.6951 and the USD/CNY pair inched up 0.01% to 6.4672.

The GBP/USD pair inched down 0.02% to 1.3707. The pound recovered from a five-and-a-half month low of $1.35725 hit on Tuesday, even as the number of COVID-19 cases involving the Delta variant continues to rise in the U.K. and confusion remains over the lifting of restrictive measures in England.

"Strong earnings have swept away Delta concerns in the U.S.," weighing on haven currencies, National Australia Bank (OTC:NABZY) analyst Tapas Strickland said in a note. "The consensus is that the Delta strain does not pose an immediate risk to the recovery," delaying reopening by three months at the most as countries ramp up vaccination drives in response, the note added.

The euro traded at $1.1789, climbing above Wednesday’s three-and-a-half-month low ahead of the European Central Bank (ECB)’s policy decision later in the day. ECB will implement changes to their strategy for the first time and is widely expected to maintain its dovish stance, which could weaken the euro over the medium term.

"On balance, the ECB’s new inflation target suggests monetary policy will remain ultra‑accommodative for an even longer period of time," which will act as a headwind for the euro, Commonwealth Bank of Australia (OTC:CMWAY) strategists Kim Mundy and Carol Kong wrote in a research note.

"Indeed, we expect the ECB will be one of the last central banks under our coverage to tighten policy,” the note added.

Bank Indonesia will also hand down its policy decision later in the day.

In cryptocurrencies, bitcoin recorded its biggest jump since mid-June 2021, after Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk and Ark Investment Management CEO Cathie Wood discussed its prospects at the B Word conference. Musk also added that Telsa will "most likely" resume accepting bitcoin for payment.