By William L. Watts and Carla Mozee, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar edged higher against the euro and the Japanese yen Tuesday, extending a modest gain in the wake of data that showed consumer confidence fell more than expected in July while the Federal Reserve prepared to start a two-day monetary-policy meeting.
The ICE dollar index DXY +0.23% , a gauge of the greenback’s movement against six other major currencies, traded at 81.768 in recent action, up slightly from 81.663 late Monday in North America.
The WSJ Dollar Index XX:BUXX +0.29% , which measures the currency’s moves against a slightly wider basket, sat at 74.21, up from Monday’s 73.91 closing level.
The euro EURUSD -0.0482% bought $1.3244, up slightly from $1.3263, while the British pound GBPUSD -0.5559% fell to $1.5317 from $1.5349.
The Conference Board said its July consumer-confidence index fell to 80.3 from an upwardly-revised 82.1 in June. Economists had forecast a reading of 81.1.
The dollar brushed off the data. The reading still leaves the index near highs seen ahead of the worsening of the financial crisis in 2008, said Annalisa Piazza, economist at Newedge Strategy in London.
The Australian dollar AUDUSD -1.5816% remains one of the day’s biggest movers, dropping to 90.55 U.S. cents to lose more than a full penny from late Monday’s level of 92 cents.
The Aussie extended losses after Reserve Bank of Australia Gov. Glenn Stevens said in a speech that the current pace of inflation wouldn’t deter the central bank from cutting interest rates further.
Disappointing Australian June building-approvals data prompted an earlier wave of selling, said Elsa Lignos, currency strategist at RBC Capital Markets. The data showed approvals fell 6.9% in June, defying forecasts for a rise, while May data was revised lower.
“Approvals continue to move higher in trend terms, but the upswing remains modest and confirms that the rotation from mining/resources capex to the non mining sectors of the economy remains challenging,” Lignos said.
The ICE dollar index had lost more than 3% since hitting its most recent high on June 9. The pullback was spurred by speculation about when the Fed will begin tapering its bond purchases and by subsequent comments from Fed Chairman Ben Bernanke about interest rates staying low for an extended period.
“We believe the sustainability of the recovery in the U.S. economic activities will still require accommodative monetary policies in place to support growth,” analysts at Prime Holding wrote Friday.
Monetary stimulus has been seen as weighing on the dollar’s value.
The Fed’s policy statement was due out Wednesday, and investors will likely look for any signs about the eventual wind-down of the central bank’s stimulus.
This week’s gathering is the last before the Sept. 18 Fed meeting “when tapering is widely expected to be announced,” Tan said in a note.
“The market generally expects the Fed tomorrow to restate its two key messages that tapering will commence soon but rates will be kept low for longer. The Fed has made plain that policy will be data dependent, and as such the market impact of the slew of important U.S. data this week (GDP, ISM manufacturing & nonfarm payrolls) should not be underestimated,” Tan wrote.
Data on Tuesday showed U.S. home prices continued to accelerate in May, with the S&P Case-Shiller 20-city composite jumping 2.4%, contributing to a year-over-year increase of 12.2%.
Against the Japanese currency, the dollar USDJPY +0.09% traded at ÂĄ98.26, up from ÂĄ97.84 late Monday, when the dollar traded at its lowest level against the yen since June 26, according to FactSet data. The dollar traded as high at ÂĄ98.46 in earlier action Tuesday.
Over the weekend, Japan’s prime minister indicated he could scale down plans for a sales-tax hike.
On Tuesday, meanwhile, the Japanese government released reports showing industrial production unexpectedly dropped in June and consumer spending also missed expectations.
The reports followed Monday’s release that Japanese retail sales rose a less-than-expected 1.6% in June from the year-earlier period.
Japanese Prime Minister Shinzo Abe “has to walk a fine line between assuring investors that proper fiscal reforms will take place to mitigate the country’s massive $5 trillion debt, while at the same time he must pursue an aggressive expansionist policy in order to continue stimulating the economy,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management.
William L. Watts is MarketWatch's senior markets writer, based in New York. Follow him on Twitter @wlwatts.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
