MW: Dollar fades after durable-goods, home sales data
Greenback at lowest versus Swiss franc since March 2008
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar declined against the euro, the Japanese yen and other major currencies Friday, extending losses after a report on durable-goods orders seen as helping boost U.S. economic growth in the third quarter.
The greenback fell back against the yen as doubts grew over Japanese authorities’ rumored intervention to sell yen and buy dollars.
The dollar index (DXY 79.35, -0.66, -0.82%) , which tracks the greenback against a basket of major currencies, declined to 79.370, down from 79.644 before the data and down from 80.035 late Thursday.
The euro (EURUSD 1.3476, +0.0163, +1.2245%) erased early weakness to rise to $1.3466, up from $1.3333 in late North American trading Thursday.
The U.S. Commerce Department reported data that showed that orders excluding volatile transportation orders and a gauge of capital spending by businesses both rose last month. Read about durable-goods orders
August’s durable-goods orders “are consistent with the recent string of economic data suggesting that the U.S. economy might be stabilizing after the disappointing second quarter,” said strategists at Brown Brothers Harriman.
A separate report showed the pace of sales of new homes in the U.S. stayed flat at 288,000 in August, while some economists expected a small improvement.
Currency traders are still worried that the U.S. Federal Reserve will launch a new asset-buying program before the end of the year to help support the faltering economy and reduce the risk of falling into deflation. So-called quantitative easing programs weaken a country’s currency.
The euro gained additional support after Germany’s Ifo Institute said its business-climate index for Europe’s largest economy unexpectedly rose to its highest level since June 2007. Read about the Ifo index.
The British pound (GBPUSD 1.5830, +0.0147, +0.9374%) rose 0.8% to $1.5812.
Japan’s intervention ... or not
Against the yen, the dollar (USDYEN 84.2000, -0.1900, -0.2252%) faded to buy ¥84.29, down from ¥84.37 late Thursday. Japanese authorities declined to confirm or deny the intervention rumors, news reports said.
The dollar had spiked as high as ¥85.37 during the Asian trading session, after talk of large selling orders triggered speculation that the authorities had again intervened in foreign-exchange markets
Paul Mackel, senior currencies strategist at HSBC, said Japan needs to be more forceful if it wants to win its fight to halt the rise of the yen.
The Ministry of Finance and the Bank of Japan “need to be fast and furious if they want to succeed and see yen appreciation subside. [They] cannot be silent if they want to win this battle,” he wrote in a research note.
Japanese monetary authorities had intervened in the currency market last week after the dollar dropped to ¥82.85 — the lowest in more than 15 years. Read more about last week’s yen intervention.
The dollar’s slide back below ¥85 this week, however, had left the currency pair looking weak from a technical standpoint, Mackel said.
Strategists at FxPro said traders now doubt Japanese authorities had intervened, attributing the yen’s 1% spike on the dollar partly to a “bulky buy order in thin markets” following Thursday’s Japanese public holiday.
Traders had attributed the yen’s sudden plunge to talk that Bank of Japan Governor Masaaki Shirakawa may resign, according to Reuters. Read more about the resignation speculation.
Gold also gained from a weaker U.S. dollar, hitting a new record high and topping $1,300 an ounce. Read about the new high for gold.
Separately, the dollar fell against the Swiss currency (USDSWF 0.9835, -0.0021, -0.2131%) falling 0.7% to 0.9793 franc.
The drop marked the first time the U.S. unit has fallen below 0.98 franc since March 2008, according to the EBS platform, strategists said.
“The market is looking for any excuse to sell dollars,” said Elizabeth Gregory, currency strategist at ACM in Geneva, noting that the euro held its ground versus the Swiss currency. The euro (EURCHF 1.3254, +0.0131, +0.9984%) added 0.4% to buy CHF1.3188 francs.
