CURRENCIES: Dollar Loses Ground As Euro Climbs On Tapering Hopes

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Theresa May thwarts dissent in her government for now

Continue Reading Below

The dollar index continued to move lower on Tuesday, pressured by advances in the pound and euro as traders regained confidence in U.K. Prime Minister Theresa May and reacted to hawkish comments from a member of the European Central Bank.

The Turkish lira rebounded against the dollar after Monday's tumble, which followed a diplomatic spat between Ankara and Washington.

Where are currencies trading?

The ICE dollar index slipped 0.2% to 93.530, falling for a third straight session. The benchmark on Friday hit a 10-week high after the September U.S. jobs report was seen as strengthening the case for the U.S. Federal Reserve to raise interest rates in December.

The euro climbed to $1.1775 on Tuesday from $1.1743 late Monday in New York.

Continue Reading Below

The pound rose to $1.3184, compared with $1.3141 on Monday, while the yen rose to Yen112.41 to the dollar from Yen112.68 on Monday.

The dollar slumped to 3.6831 Turkish lira from 3.7011 lira on Monday. The lira tumbled against the greenback on Monday (http://www.marketwatch.com/story/turkish-lira-tumbles-amid-visa-spat-with-us-2017-10-08) to a six-month low after Turkey and the U.S. stopped issuing nonimmigrant visas to each other's citizens, after Turkey arrested a Turkish employee who worked at the U.S. consulate in Istanbul.

What's driving the market?

The euro was boosted by hawkish comments from ECB executive board member Sabine Lautenschlaeger, who said on Monday the central bank should start scaling back its aggressive bond buying program next year. Traders are expecting an update on the future of the asset-purchase program when policy makers meet later in October.

Euro traders were also monitoring the situation in Catalonia, where separatist leader and Catalan President Carles Puigdemont may declare the region's independence from Spain later in the day.

Meanwhile in the U.K., the pound got a lift from the latest developments in the country's political drama, with Prime Minister May seen as warding off dissent within her government for now.

Read:Boris Johnson in the crosshairs, as U.K. leader Theresa May gears up for key Brexit talks (http://www.marketwatch.com/story/boris-johnson-in-the-crosshairs-as-uk-leader-theresa-may-gears-up-for-key-brexit-talks-2017-10-09)

As for the dollar, analysts said the currency suffered from some profit-taking amid a lull in the news flow after the bond market was closed for Columbus Day on Monday.

What are strategists saying?

"Since the dust began to settle in the wake of Friday's hectic nonfarm payrolls there seems to have been a shift in sentiment for the dollar. A correction has started to come through as the euro and sterling have both begun to find some support," said Richard Perry, market analyst at Hantec Markets, in a note.

"The sharp rise in U.S. wage growth is still likely to e dollar supportive and a significant move against the dollar is unlikely at this stage," he added.

(END) Dow Jones Newswires

October 10, 2017 04:40 ET (08:40 GMT)