Dollar Holds Firm After Upbeat U.S. Retail Sales Data

The dollar inched higher versus a basket of major currencies on Tuesday, staying on firm footing after U.S. retail sales data the previous day signaled a brighter outlook for the U.S. economy.

U.S. retail sales recorded their largest gain in 1-1/2 years in March, the latest data to suggest growth was set to spring back in the second quarter after an unusually harsh winter.

The dollar index edged up 0.1 percent to 79.791 .DXY, holding above Monday’s intraday low of 79.562.

Against the yen, the dollar edged up 0.1 percent to 101.91 yen, staying above a three-week low of 101.32 yen set on Friday on trading platform EBS.

Some caution over tensions in Ukraine may be helping to temper the dollar’s gains against the yen, said a trader for a European bank in Tokyo.

“I get the sense that people might be taking a sell-on-rallies type of stance,” the trader said, referring to market sentiment towards the dollar versus the yen.

Investors remained wary of developments in Ukraine, where any escalation might quickly cause risk appetite to evaporate. Armed pro-Russian separatists seized more buildings in eastern Ukraine on Monday, expanding their control after the government failed to follow through on a threatened military crackdown.

But Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, said moves in U.S. 10-year Treasury yields may be a bigger key for dollar/yen now than the tensions in Ukraine.

“Dollar/yen has been showing a strong correlation to U.S. 10-year yields,” Okagawa said. With U.S. 10-year Treasury yields having recently been stuck in a range of roughly 2.6 percent to 2.8 percent, the dollar has been range-bound against the yen as well, he added.

Since early February, the dollar has mostly traded in a range of roughly 101 yen to 103 yen, although it spent some time above 103 yen from early to mid-March and also in late March to early April.


The yen showed limited reaction after Bank of Japan Governor Haruhiko Kuroda said on Tuesday that Prime Minister Shinzo Abe did not bring up additional monetary easing during one of their regular meetings.

Kuroda, speaking to reporters after the lunch meeting, said Japan was still in the process of meeting the central bank’s 2 percent inflation target, but prices were on track to achieve the goal. Kuroda also said he told Abe that he would not hesitate to adjust monetary policy if needed.

The euro held steady at $1.3815, staying below a three-week high of $1.3906 touched on Friday.

The euro remained under pressure from weekend comments from European Central Bank officials, including ECB President Mario Draghi, who rekindled speculation about more easing in the euro zone.

The Australian dollar slipped 0.4 percent to $0.9389, with the near-term focus on Chinese economic indicators coming up on Wednesday, including data on gross domestic product.

The minutes of the Reserve Bank of Australia’s April 1 policy meeting released on Tuesday had limited impact on the Aussie dollar.

The RBA said economic developments in the past month had done nothing to sway its resolve to keep interest rates steady for a while, noting there had been further signs that low borrowing costs were supporting growth.

“There was very little in the way of new information that we got from the minutes,” said Hamish Pepper, currency strategist for Barclays in Singapore, adding that the minutes were very much in line with the RBA’s post-meeting statement on April 1.

Source : Reuters