Dollar Falls Ahead of Heavy U.S. Data Week

The dollar succumbed to profit-taking after setting a fresh six-month high against the yen on Monday in Asia as investors awaited a series of major U.S. economic indicators to be released this week.

The greenback hit a fresh half-year high of Y102.65 earlier in the day, but the rising momentum didn’t last. The U.S. currency also fell against the Australian dollar after China’s manufacturing data showed some expansion, prompting demand for the Aussie. Australia is a key resource supplier for China.

“The dollar came under broad selling pressure,” said Atsushi Hirano, head of FX sales Japan at Royal Bank of Scotland. “Profit-taking has kicked in on the dollar/yen.”

The HSBC China Manufacturing Purchasing Managers’ Index had a final reading of 50.8 in November, compared with 50.9 in October. A reading above 50 indicates expansion.

The dollar was at Y102.38 as of 0500 GMT from Y102.42 late Friday in North America, according to EBS. The Australian dollar was at $0.9149 from $0.9109. The U.K. pound was at $1.6422 from $1.6367. The WSJ Dollar Index, a measure of the dollar against a basket of currencies, was at 73.446 from 73.547.

The U.S. holiday shopping season started with estimated total spending over the Thanksgiving weekend falling to $57.4 billion, down 2.7% from a year ago, according to the National Retail Federation. The federation said it still expects total holiday sales through the year-end to rise 3.9% from a year ago.

The euro was at $1.3603 from $1.3588. Mike Jones, currency strategist at the Bank of New Zealand, said Friday’s solid euro-zone consumer price index data means a follow-up European Central Bank rate cut this week is highly unlikely.

“The euro is likely to maintain a positive bias as a result,” he said.

Over the coming days, investors will continue to focus on U.S. economic indicators, including manufacturing sentiment data to be released later in the global day, to gauge the strength of the U.S. economy and the prospect of the Federal Reserve slowing down its asset purchases.

“Mixed readings will probably be the best for stocks and the dollar/yen,” said Mr. Hirano.

Strong figures could increase speculation for a quick scale back of the Fed’s easing, hurting stocks, while weak readings could raise concerns about the fundamental strength of the economy, weighing on U.S. bond yields and the dollar. Investors are particularly paying attention to the non-farm payrolls data to be released on Friday.

“The U.S. jobs data could establish a trend,” said Akira Moroga, manager at forex products group at Aozora Bank.

Source: Marketwatch