Dollar Falls With Data Deluge, Fed Meeting On Tap

The U.S. dollar fell Monday, extending last week’s losses ahead of a monetary-policy decision from the Federal Reserve and key U.S. monthly jobs data due later this week.

The ICE dollar index  , a gauge of the greenback’s movement against six other major currencies, was at 81.549, down from 81.665 late Friday in North America. The index fell 1.1% last week.

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The WSJ Dollar Index  , an alternative measure of the currency’s moves against a slightly wider basket, fell to 73.73 from 73.85 on Friday.

“Currency markets have been more active than international equity markets in recent days as traders position for this week’s [Fed] meeting by selling the U.S. dollar,” CMC Markets chief market analyst Ric Spooner said in a note Sunday.

Against the Japanese yen, the dollar  on Monday dropped to a one-month low, buying ¥97.87, compared with ¥98.25 late Friday in North America. The dollar had briefly pared losses against the yen after a report that Japanese retail sales in June rose 1.6% from the year-ago period, with the result slightly below expectations for a 1.9% rise.

Among other data slated for release this week are manufacturing data from China and Japan for July, manufacturing surveys from Australia and the euro zone, and the first look at second-quarter growth in the U.S.

The markets are also due to get updates on monetary policy from the Fed, the European Central Bank and the Bank of England after their respective meetings.

“Fundamental considerations are likely to dominate technical factors in the week ahead,” currency analysts at Brown Brothers Harriman led by Marc Chandler said in a note Sunday.

“Not to put too fine of a point on it, and recognizing the likelihood of a sub-1% (annualized) U.S. GDP, we expect the news stream to be supportive of the dollar,” they said.

The market’s most anticipated report is slated to arrive Friday from the Labor Department, which is currently expected to show the U.S. economy created 175,000 jobs in July and that the unemployment rate dipped to 7.5% from 7.6%, according to economists polled by MarketWatch.

The Fed has said labor-market conditions are a major component in its assessment of whether to slow the pace of stimulus efforts for encouraging economic growth.

Dollar weakness has dragged the ICE dollar index down for the past three weeks, partly on speculation the Fed would delay the start of the tapering of its bond-buying program beyond its September meeting. Monetary stimulus has been considered a drag on the dollar’s value.

Also, improving economic news from Europe has buoyed the euro and sterling against the greenback this month.

Looking at technical factors for the ICE dollar index, BBH said: “A move back above 82.00, and ideally 82.40, would likely confirm a near-term bottom and spur a bottoming of the technical indicators.”

CMC Markets’ Spooner said that, given recent economic data, there appears little risk the Fed will suggest it will be more aggressive on tapering monetary stimulus than what the market currently expects.

“The risk is all the other way, with potential for the Fed to emphasize that it won’t reduce its asset-buying program unless unemployment continues to fall,” Spooner said.

In other currency action Monday, the euro  traded at $1.3290, up from $1.3274 on Friday. The British pound  was buying $1.5399, up from $1.5381.

The Australian dollar  traded at 92.79 U.S. cents, rising from Friday’s level around 92.62 U.S. cents.

Source : Marketwatch