Monday, March 28, 2016

FOREX-Yen under pressure, U.S. data disappoints dollar bulls

The yen nursed broad losses early on Tuesday and even underperformed a defensive greenback, which sagged on the back of disappointing U.S. economic data.

Traders said speculation of more monetary stimulus and talk that Japanese Prime Minister Shinzo Abe will delay an unpopular sales tax hike and call a snap election appeared to be keeping the yen under pressure.

The dollar, euro and sterling all hit two-week highs against their Japanese peer. The greenback climbed as far as 113.69 yen JPY=[1], the euro reached 127.05 EURJPY=R and sterling touched 161.86 yen GBPJPY=R. The dolla r last stood at 113.45.

Sellers also took aim at the greenback after soft U.S. consumer spending prompted economists cut their first-quarter gross domestic product growth estimates.

The Atlanta Federal Reserve's GDPNow forecast model on Monday showed the U.S. economy growing at below an annualized 1 percent in the first quarter, down from 1.4 percent in the fourth quarter.

The disappointing outcome dimmed expectations for an imminent hike in U.S. interest rates, which some Federal Officials last week said could be as early as next month if the economy maintained its momentum.

The dollar index last stood at 95.960 =USD.DXY, having slipped 0.2 percent on Monday. It lost ground against the euro, which was again flirting with $1.1200 EUR=[2], off last week's trough of $1.1144.

Sterling came within striking distance of $1.4300 GBP=D4[3], pulling away from last week's trough of $1.4056, while commodity currencies such as the Canadian and Australian dollars CAD=D4[4]AUD=DR also rose.

The Aussie was last at $0.7543 AUD=D4[5], following a 0.5 percent gain.

Whether the turn in U.S. dollar sentiment will persist depends on what Fed Chair Janet Yellen says at a speech to the Economic Club of New York. She is due to speak on the economic outlook and monetary policy at 1620 GMT (12:20 p.m. EDT) on Tuesday.

"In the US, the biggest question remains the timing and magnitude of Fed rate hikes. In the last few days alone it feels like the case has swung from supporting the Fed's most recent dovishness to opposing it and back to supporting it again," analysts at ANZ wrote in a note to clients.

"It is a backdrop that is keeping many on their toes and makes maintaining conviction in views difficult. With Yellen speaking tonight and key data on the calendar for later in the week (ISM, payrolls), there'll be plenty to ponder.

Trading will also pick up as Europe returns from the Easter long-weekend.

(Reporting by Ian Chua; Editing by Eric Meijer)

References

  1. ^ JPY= (www.reuters.com)
  2. ^ EUR= (www.reuters.com)
  3. ^ GBP=D4 (www.reuters.com)
  4. ^ CAD=D4 (www.reuters.com)
  5. ^ AUD=D4 (www.reuters.com)

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