SF: Dollar to Beat Commodity Currencies on U.S. Data, Barclays Says
Aug. 23 (Bloomberg) -- The dollar may gain against commodity-related currencies this week as weak U.S. economic data and prospects for further easing by the Federal Reserve drive demand for safety, Barclays Capital said.
Fed policy makers said this month the recovery was "more modest" than they had projected, prompting them to take additional steps to revive growth. Futures trading on the CME Group exchange shows a 63.4 percent chance the Fed will maintain the target rate for overnight bank lending by its March meeting, up from 59.1 percent probability one month ago.
"With the market increasingly pricing in the possibility of additional quantitative easing measures and the expected timing of a rate hike pushed further into the future, the results of U.S. data became more related to general risk sentiment," currency strategist Yuki Sakasai and economist David Forrester at Barclays wrote in a report dated today. The dollar, yen and Swiss franc are likely to strengthen "if the data surprise to the downside as we expect," the report said.
Commodity-linked currencies, including those of Australia, New Zealand and Canada, recently started to gain in tandem with positive U.S. data, the analysts wrote, citing Barclays' Data Surprise Index. U.S. reports this week, including figures on home sales and gross domestic product, provide "modest downside risks," they wrote.
Sales of U.S. previously owned homes dropped 13 percent to a 4.65 million annual rate in July, according to the median estimate of economists in a Bloomberg News survey ahead of tomorrow's report by the National Association of Realtors.
The Commerce Department's update on Aug. 27 will show second-quarter GDP grew at a 1.4 percent pace, according to a separate survey, the weakest quarter of the recovery that began in the middle of last year. Preliminary figures released last month indicated a 2.4 percent growth rate.
The dollar traded at $1.2689 to the euro as of 4:48 p.m. in Tokyo from $1.2712 on Aug. 20. The greenback was at 85.38 yen from 85.62. The Australian dollar slipped 0.4 percent to 89.07 U.S. cents.
