Better-than-expected economic data fail to support greenback By Myra P. Saefong and William L. Watts, MarketWatch SAN FRANCISCO (MarketWatch) — The dollar weakened Monday, failing to find support from upbeat U.S. economic data, with investor appetite for risk on the rise after Federal Reserve Chairman Ben Bernanke last week signaled no immediate round of additional stimulus but left options open. The dollar index DXY -0.11% , which measures the greenback against a basket of six other currencies, fell to 73.599, off from 73.825 late Friday. Strategists noted thin overall volume, with British markets closed for a public holiday Bernanke’s remarks Friday at a conference of central bankers and policy makers in Jackson Hole, Wyo., were credited with lifting stocks in Asia and Europe and contributing to further equities gains on Wall Street. The dollar generally tends to weaken when risk appetite is on the rise and to gain when investors seek safe havens. “The market’s take from Bernanke circa 2011 seems to be: go long risk,” said David Watt, senior currency strategist at RBC Capital Markets. U.S. stocks climbed from the outset, with the Dow Jones Industrial Average DJIA +1.46% lately adding more than 150 points. Read about U.S. stock action. Economic data on Monday failed to provide support for the greenback. The Commerce Department said income of U.S. workers rose 0.3% in July as spending climbed 0.8%. The core personal consumption expenditure price index rose 0.2%, an increase matching expectations of economists surveyed by MarketWatch. Read more about U.S. consumer spending. “The turnaround in spending was the most impressive considering that consumption fell 0.2%the previous month,” said Kathy Lien, director of currency research at GFT, in a note. “Unfortunately it is never good when spending surpasses income growth because it suggests that Americans are once again falling back into the ugly habit of spending above their means.” Also Monday, the index of pending home sales fell 1.3% in July, the National Association of Realtors reported, but the index is still 14.4% above July 2010 levels. U.S. stocks traded near the session highs immediately after the data were released. Read about pending home sales. Mixed assessment Some strategists tied the boost in risk appetite to remarks by Bernanke effectively signaling that the Fed would keep its options open and could yet provide a further round of stimulus if the U.S. economy weakens further. “Although Bernanke did not signal new steps to promote growth, he kept all options open, which ultimately helped risk sentiment. Fears that Hurricane Irene would wreak havoc in New York City have proved largely unfounded,” also helping to lift equities, said Chris Walker, currency strategist at UBS. The euro EURUSD +0.24% traded at $1.4520, up from $1.4483 in North American trading late Friday. European markets were buoyed as Alpha Bank SA and EFG Eurobank Ergasias SA, two of Greece’s largest banks, announced a merger agreement. The British pound GBPUSD +0.51% also rose, up to $1.6402 from $1.6341 late Friday. Meanwhile, the Japanese yen lost ground after Japan’s ruling-party lawmakers chose Finance Minister Yoshihiko Noda as the next leader of the Democratic Party of Japan, all but ensuring he will replace Naoto Kan as the nation’s next prime minister. Read more: Noda wins Japan’s DPJ leadership battle. In recent action, the dollar USDJPY +0.18% climbed to ¥76.95, compared with ¥76.71 yen in North American trading late Friday. “The transition could derail confidence in the government’s ability to address the risks surrounding the region, as policy makers come under increased scrutiny,” said David Song, currency analyst at the DailyFX. “In turn, the central bank may have little choice but to step up its efforts to shore up the economy, and we may hear the Bank of Japan announce additional measures next month as the region struggles to recover from the devastating earthquake and tsunami from earlier this year,” Song said.

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