MW: Dollar treads water as equities resume upward push
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- The dollar was holding its ground versus major rivals Thursday as U.S. equity markets appeared poised to resume their upward push.
Rising equity markets correspond with a rise in investors' appetite for risk, which has translated into weakness for the U.S. dollar and the Japanese yen. Conversely, the two currencies have tended to benefit from safe-haven flows when investors exit equities.
A "pro-risk" environment remains in evidence, although equity markets may be nearing levels not supported by valuations and uncertainty about the economic outlook, said Kenneth Broux, a market economist at Lloyds TSB.
As a result, the dollar index (DXY 78.78, +0.07, +0.09%) , which tracks the greenback against a trade-weighted basket of major currencies, could remain under pressure, potentially setting up a test of its 2009 low in the near term, he said. The index set a 2009 low near 78.40 last month, according to FactSet Research.
This week's congressional testimony by Federal Reserve Chairman Ben Bernanke underscored ideas that interest rates are unlikely to rise until U.S. non-farm payrolls turn positive or, at least, begin to fall at a much slower pace, Broux said.
The dollar index (DXY 78.78, +0.07, +0.09%) , which tracks the greenback against a trade-weighted basket of six major currencies, traded at 78.849, up slightly from 78.745 in North American trade late Wednesday.
The dollar was helped by a rise versus a broadly lower Japanese yen. The dollar traded at 94.35 yen, up from 93.54 yen late Wednesday.
The euro bought $1.4217, little changed from $1.4222 late Wednesday, and the British pound changed hands at $1.6515, up from $1.6456.
Economic data on tap for Thursday includes weekly jobless claims, due at 8:30 a.m. Eastern, and existing home sales data for June, tapped for release at 10 a.m.
The British pound was boosted after the Office for National Statistics said June retail sales rose by a larger-than-expected 1.2%. Economists had forecast a more subdued 0.3% rise in sales volumes.
The data added to the bullish sterling tone that was bolstered on Wednesday when the minutes of the July meeting of the Bank of England's Monetary Policy Committee appeared to reinforce ideas the central bank will be reluctant to expand its 125 billion pound ($205 billion) asset-purchase plan, analysts said. See earlier story.
Strategists at BNP Paribas said the yen is coming under significant pressure on reports that Japanese retail investor appetite for higher yield products is picking up.
Meanwhile, the Japanese government posted preliminary data reflecting a trade surplus for the fifth straight month in June, rising almost five-fold from the year-ago period, even though the figure nonetheless fell shy of economists' estimates.
