Earlier: Dollar Pares Gains Vs Yen After Weaker US Data
By Fabio Alves
OF DOW JONES NEWSWIRES
NEW YORK -- The dollar gave back most of its earlier gains on the yen Monday morning in New York after weaker-than-expected economic data revived concerns about the pace of an economic recovery in the U.S.
A plunge in U.S. existing-home sales in December prompted investors to migrate to the yen, viewed as the safest currency. The euro's rally overnight against both the dollar and the yen also lost some steam as the disappointing economic data reduced gains in the U.S. stocks and other riskier assets.
"The weaker housing market number did cause risk appetite this morning to pare back," said Kathy Lien, a director of currency research at GFT Forex in New York. The negative existing-home sales report "reinforced the tough conditions ahead" for the U.S. economy, she said.
Monday morning in New York, the euro was at $1.4143 from $1.4138 late Friday, according to EBS via CQG. The dollar was at Y90.01 from Y89.92, while the euro was at Y127.37 from Y127.10. The U.K. pound was at $1.6205 from $1.6100. The dollar was at CHF1.0405 from CHF1.0415.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 78.224 from 78.280.
Existing-home sales plunged in December, dropping lower than expected after three straight increases that were fed by a fat government tax credit.
Home resales fell by 16.7% to a 5.45 million annual rate from an unrevised 6.54 million in November, the National Association of Realtors said Monday.
Economists surveyed by Dow Jones Newswires expected an 11.6% decrease in sales during December, to a rate of 5.78 million.
"The U.S. existing-home sales number was horrendous," said Jacob Oubina, a currency strategist at Forex.com in Bedminster, N.J. The data affected the stock market and boosted the yen against other major currencies, he said.
Nevertheless, the partial recovery in the yen was limited by bets that central banks in Japan and the U.S. will signal this week interest rates are likely remain low to bolster the faltering economic recovery.
Rate-setting meetings by the Bank of Japan and the Federal Open Market Committee are dominating investors' attention.
"What you're seeing now is a bit of positioning adjustment ahead of" economic events this week, said Michael Hewson, a currency analyst at CMC Markets in London. "Markets are waiting to see what sort of language the Federal Reserve is going to use and if there's any change in tone."
Analysts expect the FOMC to keep near-zero interest rates unchanged as well as language in the statement following its decision, due out Wednesday, pledging to keep rates "exceptionally low and for an extended period of time."
The BoJ is expected to further introduce monetary stimulus into the markets in a bid to fight deflation, or a persistent decline in consumer prices.
"The yen may also be pressured by speculation that the BoJ may extend either its emergency lending--amount and/or duration--to banks or purchase more JGBs [Japanese Government Bonds] as early as [Tuesday] at the conclusion of its policy meeting," Brown Brothers Harriman strategists wrote in a note to clients Monday.
Meanwhile, White House officials expressed confidence Sunday that Bernanke would be confirmed for a second term as chairman of the Federal Reserve, a view that was echoed by the leading Republican in the Senate.
"He's going to have bipartisan support in the Senate and I would anticipate he'd be confirmed," top GOP Sen. Mitch McConnell of Kentucky said on NBC's "Meet The Press."
That helped reduce uncertainty created by the delay in the Senate's vote last week.
In Europe, spreads on Greek government bond yields rose to above 3.0 percentage points after the price guidance for Greece's forthcoming EUR3 billion to EUR5 billion syndicated issuance of a five-year bond--seen as a key test of investor confidence--was announced, but were off from Friday's peaks.
Greece will price its five-year, euro-denominated benchmark bond issue in the area of 350 basis points over mid-swaps, one of the lead managers of the deal said Monday. The order book reached EUR25 billion.
"The euro upside against the dollar is going to be fairly limited while the sovereign debt issue weighs on the market. I still think there's more to come from that, not only from Greece, but also from Portugal, Spain and Italy," CMC's Hewson said. |
