Dollar Shows Mixed Trading Against Majors
Monday, the dollar showed mixed performance against its major counterparts as investors will be looking to a slew of economic indicators this week for further clues about the strength of the U.S. economic recovery.
While the dollar recovered from a new multi-week low against the yen, it fell from a 4-day high against the euro and the franc. On the other hand, the dollar soared to a 4-day high against the pound.
The U.S. economy has been kick-started into growth but investors still face an uncertain outlook as Wall Street gears up for comments from the Federal Reserve and a key report on employment this week.
The Fed’s policy statement could signal fewer liquidity measures for markets, while nonfarm payroll data and the Institute for Supply Management surveys on the manufacturing and service sectors will give early indications of how the economy is faring in the fourth quarter.
Investors are nervous that monetary and fiscal stimulus measures may be ended too soon.
The bankruptcy of CIT Group Inc (CIT.N) on Sunday will also feed pessimism about the economy this week. The century old commercial lender was brought down by the global credit crisis that left it unable to fund itself, while the recession left it with too many bad loans.
The bankruptcy, one of the largest in U.S. corporate history, has been widely expected for months and is unlikely to provide a massive near-term shock to the financial system. But CIT’s trouble could further weigh on the fragile U.S. economy.
The bankruptcy is also a blow for the U.S. government, which invested $2.33 billion in CIT in December through the Troubled Asset Relief Program and will likely lose most of it.
The dollar slipped after reaching a 4-day high of 1.4685 against the euro and 1.0281 against the franc at 6:40 pm ET Sunday. At present, the dollar is worth 1.4789 against the euro and 1.0212 against the franc, compared to Friday’s close of 1.4710 and 1.0265, respectively. The near term support for the dollar is seen at 1.017 against the franc and 1.486 against the euro.
The Swiss SVME purchasing managers’ index or PMI dropped to 54 in October from 54.3 in September, a report from Credit Suisse showed today. Economists had expected an increase to 54.9.
Meanwhile, a final report from Markit Economics said today that the Euro-zone manufacturing Purchasing Managers’ Index or PMI climbed to 50.7 in October from 49.3 in September. The index was unchanged from the flash estimate.
Against the currency of U.K., the dollar is currently trading at a 4-day high of 1.6349. If the dollar gains further, it may target the 1.625 level. At Friday’s close, the pound-dollar pair was quoted at 1.6434.
The average asking price of a home in the United Kingdom was up 0.2 percent to 156,400 pounds in October, according to property data manager Hometrack, climbing for the third consecutive month.
Prices also had added 0.2 percent in September. On an annual basis, home prices were down 4.2 percent following the 5.6 percent contraction in the previous month.
The dollar plummeted to a new multi-week low of 89.21 against the yen before bouncing back at 6:45 pm ET Sunday. As of now, the dollar-yen pair is trading at 90.30, up from last week’s close of 90.10. The next target level for the U.S. currency is seen at 91.6.
Traders are now likely to focus on the New York session, in which the results of the manufacturing survey of the Institute for Supply Management are due out at 10 am ET. Economists expect the index to show a reading of 53 for October.
The Commerce Department’s construction spending report to be released at 10 am ET is expected to show a 0.2% decline in spending for September.
Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 am ET. The index is expected to edge down 0.1% in September.
