Dollar treads water after mixed US data provides few catalysts

TOKYO: The dollar steadied in holiday-thinned Asian trading on Wednesday after data overnight painted a mixed picture of the US economy, with major currency pairs bobbing in narrow ranges.

The dollar index, which tracks the greenback against a basket of six rival currencies, inched up to 98.276 after marking three losing sessions, but was still well below a two-week high of 99.294 set on Thursday last week. Volume was relatively thin, with Tokyo markets closed for the Japanese emperor’s birthday and many investors already away for the Christmas holiday later this week.

Data on Tuesday showed US gross domestic product grew at a 2.0 percent annual pace in the third quarter, slightly slower than the initial estimate reported last month, but still better than the 1.9 percent expected by economists. US consumer spending rose in November by 0.3 percent, according to data inadvertently released late on Tuesday by the US Bureau of Economic Analysis, about 12 hours ahead of schedule.

The final third-quarter reading of core PCE, a measure of domestic core inflation which is also the Fed’s preferred inflation measure, rose to 1.4 percent, slightly beating expectations for an unchanged reading of 1.3 percent. But other data showed that US home resales unexpectedly plunged 10.5 percent to an annual rate of 4.76 million units in November, their steepest drop since July 2010.

“Weaker-than-expected November sales suggest that a sizeable contraction in brokers’ commissions will dampen otherwise solid residential investment growth in Q4,” strategists at Barclays wrote, and lowered their fourth quarter GDP tracking estimate one-tenth, to 1.6 percent. After the US Federal Reserve’s widely anticipated interest rate hike last week, market focus has now turned to the outlook for policy.

A Reuters poll on Friday predicted the US central bank would raise rates again in March, but might move more slowly after that, and bearish data surprises are likely to lower expectations of more tightening.

The dollar was down slightly at 121.01 yen, well below its Friday high of 123.49 yen and not far from a one-week low of 120.72 touched on Tuesday.

The euro edged down about 0.2 percent to $1.0937, giving back some of this week’s position-driven shortcovering gains in the wake of the indecisive outcome of the weekend elections in Spain.

Reuters

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