Dollar pushes Higher but near lows after downbeat U.S. data

The dollar clawed its way higher but remained not far from a three-month low against the euro in Asian trade on Monday after downbeat U.S. economic data raised bets that the Federal Reserve will wait longer to raise interest rates.

Industrial production fell for a fifth straight month in April and consumer confidence sagged in early May, quashing any remaining expectations that the U.S. central bank will begin raising rates as early as next month and backing the case that policymakers would hold off until September or December.

The euro was buying $1.1436 EUR=, down about 0.1 percent on the day but not far from its Friday peak of $1.1468, as investors and strategists mulled how far its rally can run.

“Higher European bond yields have dragged the euro higher, but from our perspective, it just seems unsustainable,” said Mitul Kotecha, head of currency strategy for Asia-Pacific at Barclays in Singapore.

Technical resistance lies around $1.1535 and then at $1.1585, he said.

“We would look to see signs of a topping out at these sort levels, and we would fade any rally from here, and basically retain the bearish view that we have,” he said.

The greenback’s recent slump against the common currency came even against the backdrop of Greece’s financial crisis, as its talks with its lenders over reforms drag on.

German politicians kept up the pressure on Greece over the weekend to implement reforms, with Economy Minister Sigmar Gabriel warning Athens in an interview that a third aid package would not be on the cards unless the Greeks made some changes.

Data from the Commodity Futures Trading Commission released on Friday showed that speculators further pared back their bullish dollar bets in the week ended May 12, pushing the net long position down for the seventh straight week to their lowest in nine months.

Against a basket of six major currencies, the dollar added about 0.3 percent to 93.230 .DXY, after posting its fifth straight weekly decline. Its longest losing streak in four years brought it as low as 92.133 last Thursday, its lowest in nearly four months.

“While the dollar is still vulnerable to some additional near-term losses, we argue on both fundamental and technical grounds, it is premature to invest as if a new bear market for the dollar has begun,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note to clients.

Expectations of divergent monetary policy remain in place in the longer term, with the Fed still poised to eventually tighten while the European Central Bank and the Bank of Japan maintain quantitative easing policies to shore up their economies.

The dollar’s 11-month rally saw it rise 27.5 percent between May 2014 and March 2015, while its recent pullback has been about 7.4 percent, Chandler said. The minimum Fibonacci 38.2 percent retracement lies near 92.20, he added, with resistance now seen near 94.00.

The dollar edged up about 0.3 percent against its Japanese counterpart to 119.60 yen JPY=, down from a session high of 119.77 yen and within a familiar range that has held since last month.

The Bank of Japan is widely expected to maintain the current pace of monetary expansion at its policy review on Friday.

BOJ Governor Haruhiko Kuroda said last week that he did not see any immediate need for further monetary easing as the broad trend of inflation was steadily improving.

Data released earlier on Monday showed Japan’s core machinery orders grew in March for the first time in two months but were seen sliding in the current quarter, suggesting that weak capital spending could further sap economic momentum.

The New Zealand dollar was a significant mover in Asian trade, tumbling on news of a capital gains tax on New Zealand property investments which added to rate-cut speculation.

New Zealand’s government on Sunday said that income gained on residential properties sold within two years of purchase would be taxed at up to 33 percent.

The kiwi NZD=D4 dropped about 0.7 percent to $0.7432, while the euro added about 0.6 percent to buy NZ$1.5382 EURNZD=R after touching a three-month high of NZ$1.5404.

Source: Reuters