Sept. 6, 2010, 7:33 a.m. EDT
Dollar consolidates as risk appetite buoyed in quiet trade
Kiwi holds ground in wake of New Zealand earthquake
LONDON (MarketWatch) -- The dollar consolidated versus major rivals in quiet trade Monday, as investor appetite for riskier assets remained buoyed by a stronger-than-expected round of U.S. labor data last week.
Overall activity was subdued with no major data releases in Europe and U.S. markets closed for Labor Day.
The dollar index /quotes/comstock/11j!i:dxy0 (DXY 82.04, -0.06, -0.07%) , a measure of the greenback against a basket of major currencies, traded at 82.05 after slipping to around 81.880.
The index traded at 82.20 in North American trade late Friday.
The dollar and Japanese yen have tended to weaken when risk appetite is on the rise and gain ground when traders abandon equities and other assets perceived as risky in favour of safe havens.
Steven Barrow, currency strategist at Standard Bank, warned against reading too much into the payrolls data. Although stronger than expected, the figures still point toward sluggish economic growth, he said.
"It might imply that the Fed won't seriously address the [quantitative easing] question at the Sept. 21 meeting, but there's no all-clear yet for the rest of the year," Barrow said in a research note. "Hence we do not think that the dollar is about to embark on some sort of significant slide caused by a slump in risk aversion ... nor do we believe that the bonds are about to give back the gains that they have made in recent months."
European stocks were slightly higher, following through on gains scored Friday on a smaller-than-expected drop in total U.S. nonfarm payrolls in August and a larger-than-expected rise in private payrolls. See Europe Markets. Read about Friday's nonfarm payrolls data.
The dollar changed hands at 84.22 Japanese yen /quotes/comstock/21o!x:susdjpy (USDYEN 84.1800, -0.1900, -0.2252%) , down from ¥84.33 on Friday.
The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.2873, -0.0013, -0.1009%) traded at $1.2874, down from $1.2896.
The British pound was bearing the brunt of selling pressure in Monday's trade, falling to $1.5361 versus the dollar /quotes/comstock/21o!x:sgbpusd (GBPUSD 1.5410, -0.0029, -0.1878%) from $1.5451 on Friday. The euro gained 0.4% versus sterling to buy 83.80 pence.
The Australian dollar was little changed versus the U.S. dollar, trading at 91.55 U.S. cents.
The New Zealand dollar, meanwhile, stood unfazed in the aftermath of a 7.1 magnitude earthquake that caused extensive damage Saturday in Christchurch. Some insurers attempted Monday to quantify exposure to the quake. Read about the aftermath of the New Zealand quake.
The U.S. dollar fell 0.3% to trade at NZ$1.3810, while the Australian dollar lost 0.4% versus the New Zealand currency to change hands at NZ$1.2645.
Gareth Berry, foreign exchange strategist at UBS, said the quake could eventually pressure the kiwi. The potential impact on consumer and business confidence could persuade the country's central bank not to hike interest rates on Sept. 16, in line with shifting market sentiment, Berry said. The New Zealand dollar could also be affected by how compensation claims are funded.
The government-sponsored Natural Disaster Fund holds around NZ$1 billion in unhedged overseas equities, with the remainder in domestic government bills and bonds, Berry said.
If the fund, and the wider insurance market, preferentially sells overseas holdings to raise cash, it would help moderate pressure on the kiwi, he said in a research note. And if flows are sufficiently strong, that could result in net appreciation of the currency.
William L. Watts is a reporter for MarketWatch in London.