Dollar dips in Europe as Fed nerves dominate

The dollar weakened past $1.13 per euro for the first time in a week on Thursday on nervousness over what kind of message Federal Reserve minutes due later will send on the outlook for interest rates and growth. On a day dominated by a handful of publications by the world's major central banks, caution over the minutes of the Fed's September meeting also prodded the dollar as much as a third of a percent lower against the yen and 0.6 percent lower against the Swiss franc.
Dealers said any further gains for the euro were likely to be capped around $1.1320, keeping it within a range it has held since the aftermath of the Fed's rate decision on September 17. "There is just a little bit of caution ahead of the Fed minutes," said Ian Stannard, head of European FX strategy at Morgan Stanley in London. "These are big risk factors for the market and that may cause a pause, but after that we would expect that more risk-positive environment to bounce back. We are relatively positive on some of the emerging market and commodity-related currencies in the near term."
The dollar eased 0.2 percent to 119.78 yen, inching away from this week's high of 120.57 yen set on Tuesday. By 1125 GMT, the euro was up 0.5 percent on the day at $1.1295. The yen, traditionally a safe haven for investors in times of economic stress, has benefited from the volatile mood on stock markets since August amid broader concerns over the pace of global growth. Although Shanghai shares climbed 3.4 percent as Chinese markets resumed trade after being on holiday since the start of the month, European equity markets were reluctant to push higher.
In the currency world, however, Morgan Stanley's Stannard is one of the analysts who have begun to talk up the chances of a rebound for emerging market currencies as well as those most closely linked to commodities prices into the year end. "The bearishness on China has possibly been overdone somewhat," said Tobias Davis, a currency hedging manager with Western Union in London. "But I would be very cautious in getting marginally bullish."
Sterling gained strongly in morning trade before the Bank of England's decision and statement on interest rates, but it fell back after the minutes gave little in the way of new guidance on policy while playing down the impact of the problems in some emerging markets. Sterling was flat on the day at $1.5314 half an hour after the decision. Similarly, the euro dipped marginally after the publication of minutes from the European Central Bank's last meeting.