Wednesday, December 23, 2015

Dollar edges down as mixed US data provide few catalysts

The dollar edged down in Asian trading on Wednesday after data overnight painted a mixed picture of the US economy, with major currency pairs bobbing in narrow ranges as traders wound down in a holiday-heavy week.

The dollar index , which tracks the greenback against a basket of six rival currencies, pulled down slightly to 98.215 after marking three losing sessions, taking it further away from a two-week high of 99.294 set on Thursday last week.

Volume was expected to be relatively thin, with Tokyo markets closed for the Japanese emperor’s birthday and many investors already away for the Christmas holiday later this week.

US home resales unexpectedly plunged 10.5 per cent to an annual rate of 4.76 million units in November, their steepest drop since July 2010.

“Weaker-than-expected November sales suggest that a sizeable contraction in brokers’ commissions will dampen otherwise solid residential investment growth in Q4,’’ strategists at Barclays wrote, and lowered their fourth quarter gross domestic product tracking estimate one-tenth, to 1.6 per cent.

Separate data on Tuesday had showed US gross domestic product grew at a 2.0 per cent annual pace in the third quarter, slightly slower than the initial estimate reported last month, but still better than the 1.9 per cent expected by economists.

On the brighter side, the final third-quarter reading of core PCE, a measure of domestic core inflation which is also the Fed’s preferred inflation measure, rose to 1.4 per cent, slightly beating expectations for an unchanged reading of 1.3 per cent.

After the US Federal Reserve’s widely anticipated interest rate hike last week, market focus has now turned to the outlook for future policy. A Reuters poll on Friday predicted the U.S. central bank would raise rates again in March, but might move more slowly after that, and bearish data surprises are likely to lower expectations of more tightening.

The dollar was down about 0.1 percent at 121.01 yen, well below its Friday high of 123.49 yen and not far from a one-week low of 120.72 touched on Tuesday.

The euro edged down 0.1 percent to $1.0951, giving back some of the gains it made on shortcovering this week despite the indecisive outcome of the weekend elections in Spain, casting a cloud over the future of economic reforms.

The Australian dollar inched down to $0.7229, moving back toward a one-month low of $0.7097 hit on Thursday last week.

The Aussie is down more than 11 percent for the year, largely due to a diverging interest rate outlooks between the United States and Australia.

The New Zealand dollar was nearly flat at $0.6806.

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