MW: Dollar tumbles as business orders take a beating
By Saumya Vaishampayan and Carla Mozee, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar fell against major counterparts Monday after a steeper-than-expected fall in orders for durable goods.
Meanwhile, Federal Reserve officials appeared ready to start slowing monetary stimulus next month after wrapping up a yearly gathering in Wyoming.
Orders for durable goods fell 7.3% in July, marking first monthly decline in four. Economists polled by MarketWatch had expected a seasonally adjusted drop of 4.9%.
“While the series is a notoriously volatile indicator, it is difficult to sugarcoat the dismal report,” wrote Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, Inc. The decline was the sharpest in almost one year, with drops in all of the subcomponents, he said.
“The dollar fell to session lows across the board as the very weak report raised further doubts about the prospect of a reduction in Fed stimulus next month,” Esiner added.
The ICE dollar index DXY +0.02% , which measures the U.S. currency against six others, slipped to 81.338, down marginally from 81.366 late Friday in North America. Last week, the index picked up 0.2%.
The rival WSJ Dollar Index XX:BUXX -0.08% fell to 73.77 from 73.86.
Against the Japanese yen, the dollar USDJPY -0.13% bought ÂĄ98.42, down from ÂĄ98.64, while the euro EURUSD -0.04% was little changed at $1.3384 compared with $1.3383 on Friday.
This weekend, Federal Reserve officials finished their annual retreat in Jackson Hole, Wyo., and experts attending the conference said the Fed is on track to reduce stimulus efforts in September, with a desire by bank officials to return to conventional monetary policy. The Fed currently buys $85 billion a month in assets to aid economic growth. A reduction of these bond buys would still leave the central bank with an easy monetary policy.
However, many conference attendees told MarketWatch they would prefer the central bank to delay tapering of stimulus until later this year. They cited a number of potential hurdles for the economy, such as a recent surge in interest rates, among the reasons for their views. A separate poll of economists predicted that tapering would begin soon.
Monetary stimulus is seen as depressing the value of the dollar, so a tapering delay could put further pressure on the greenback. The currency fell Friday on worries the economy needs more aid from the Fed, as sales of new U.S. homes in July slid 13.4% to adjusted annual rate of 394,000. Economists polled by MarketWatch had expected a sales rate of 485,000.
The report on new home sales also spurred a drop in U.S. Treasury yields, and recent gains in yields had been a source of upside support for the greenback.
This week “may not be particularly instructive regarding the debate over when and by how much the Fed tapers quantitative easing, with generally second-tier data” and speeches by non-voting members of the Fed’s monetary-policy board on the schedule, wrote CIBC World Markets economists Emanuella Enenajor and Andrew Grantham in a report.
Among the data expected, some figures “could cast the U.S. consumer in a slightly dimmer light, as we expect below-consensus numbers for consumer confidence and July’s income and outlays,” CIBC said. Consumer spending and confidence reports are set for Friday.
In other currency action Monday, the Australian dollar AUDUSD +0.20% rose to 90.54 U.S. cents from 90.28 U.S. cents late Friday.
The British pound GBPUSD +0.09% traded at $1.5587 versus Friday’s level at $1.5564. Markets were closed in the U.K. for a bank holiday.
Saumya Vaishampayan is a MarketWatch reporter based in New York. You can find her on Twitter @saumvaish.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
