MW: Dollar, yen rise as international equities pare gains
By Steve Goldstein & Nick Godt, MarketWatch
NEW YORK (MarketWatch) -- The dollar, along with other low-yielding currencies such as the yen, got a lift as international equities markets pared gains Tuesday, while the Australian dollar slipped after that country's central bank dropped its easing bias.
The U.S. unit has been used as safe haven by currency traders and it has tended to fall on positive economic or corporate news.
With overnight gains under its belt, however, it showed little reaction to several upbeat U.S. economic reports. The National Association of Realtors reported pending sales of existing homes rose in June for a fifth straight month. The NAR's pending-home-sales index rose 3.6% in June after an upwardly revised gain of 0.8% in May. The index is 6.7% above June 2008.
And earlier, the Commerce Department said consumer spending in the U.S. rose 0.4% in June, slightly better than expected, while personal income fell 1.3%, a slightly bigger drop than economists expected. See full story.
The rise for the dollar and the yen came as a reversal to Monday's session when strong manufacturing data around the world drove stocks to multi-month highs and the low-yielding greenback and Japanese unit lower.
"Whether we wish to label the latest move as 'irrational exuberance' of the beginning of a new era it looks like Friday and the U.S. nonfarm payroll data may hold the key," said Andrew Timothy Robinson, a strategist at Saxo Bank.
One dollar bought 95.16 yen, up from 95.38 yen in late North American trading on Monday.
The dollar index (DXY 77.67, +0.03, +0.03%) , which tracks the U.S. unit against a trade-weighted basket of six major currencies, rose to 77.701, up from 77.615 late Monday.
DXY 77.67, +0.03, +0.03%
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The euro was buying $1.4397 up from $1.4347 late Monday, and the British pound was steady at $1.642.
The Reserve Bank of Australia kept its policy cash rate steady at 3.0% Tuesday as widely expected, and issued a statement which dropped reference to a "scope for some further easing of monetary policy." See full story on RBA.
The Aussie dollar was buying 83.99 U.S. cents Tuesday, compared with 84.41 U.S. cents shortly before the central bank's decision.
Earlier Tuesday, it rose as high as 84.70 U.S. cents -- its highest level since September.
"In the end we are finishing lower than before the announcement, likely a case of the market too much positioned in one direction," said Saxo's Robinson.
