FOREX-Dollar recovers to trade higher vs euro after data

Thu Apr 25, 2013 3:46pm EDT

Related Topics

* Euro pressured by ECB rate cut expectations
    * Dollar bid after U.S. jobless claims data
    * Sterling jumps to two-month high vs dollar on UK GDP data

    NEW YORK, April 25 (Reuters) - The dollar recovered from
losses to trade higher against the euro on Thursday as
resilience in the U.S. labor market allayed some concerns about
the nation's economic recovery, with many analysts expecting
more gains ahead for the greenback.
    With the state of the labor market a key factor for U.S.
Federal Reserve policy, the dollar recovered and even traded
higher at one point after data showed the number of Americans
filing new claims for unemployment benefits fell last week. 
 
    The data offered reassurance that the bottom is not falling
out of the labor market despite signs of slower growth.
    It also appeared to offset recent signals that economic
activity softened in March and early April, a phenomenon that
economists have dubbed the spring swoon because it has happened
during the past two years.
    Orders for durable goods marked their biggest drop in seven
months in March, and despite the fall in the latest weekly
jobless claims, the U.S. labor market is still sluggish and
retail sales have been weak, which could keep the Federal
Reserve's ultra-loose policy firmly in place. 
    The Federal Reserve will likely discuss the string of weak
data at its policy meeting next week. 
    Expectations that the European Central Bank may opt to cut
interest rates has kept the euro under pressure. Senior sources
involved in the deliberations have told Reuters that momentum is
building for monetary action to help the recession-hit euro
zone. 
    "Part of the euro decline is technical and cross rate
related, with the inability for it to hold above $1.31 and also
a little spillover from euro/sterling price action," said Omer
Esiner, chief market analyst at Commonwealth Foreign Exchange in
Washington D.C.  
    The euro last traded at $1.30046, down 0.1 percent on
the day and not far from a low of $1.2954 struck a day earlier
after a German survey of business morale came in weaker than
expected.
    Signs that two months of political gridlock in Italy may be
coming to an end were seen as positive for the euro, but not
enough to offset the impact of an ECB interest rate cut.
    "There is not much of an appetite to buy the euro above
$1.31 and recent German data has raised expectations of an ECB
rate cut at its next meeting, so there is limited upside for the
euro," Esiner said.  
    Investors also remain wary of the U.S. economic recovery,
with gross domestic product data, scheduled for Friday, likely
to garner a lot of attention. 
    "All eyes now look ahead to Friday's first-quarter growth
figures," said Joe Manimbo, senior market analyst at Western
Union Business Solutions in Washington, D.C. 
   
    STERLING RALLIES
    A better-than-expected performance by the British economy
saw the pound jump to a two-month high against the dollar
. Sterling also hit a three-week peak against the euro
. 
    Britain avoided recession in the first quarter,
wrong-footing some bearish investors, who had expected a weak
number that would push sterling lower. The data watered down
expectations that the Bank of England will add to its
asset-buying program to underpin the economy.
    Sterling rose 1.1 percent to $1.5433. The euro
 fell 1.1 percent to 0.8427 pence.
    The dollar last traded at 99.25 yen, down 0.3 percent
on the day, according to Reuters data, again struggling to climb
past 100 yen - last seen in April 2009.
    Data on Thursday from Japan's Ministry of Finance on weekly
capital flows showed that Japanese investors remained net
sellers of foreign bonds.  
    Investors have been closely watching flow data for any
indication that the Bank of Japan's massive stimulus has pushed
Japanese investors to seek higher returns overseas. 
    "The strength seen by (the yen and sterling) can simply be
summed up as shifting expectations around their respective
central banks' policies, in light of the fact that the UK
economy is stronger than previously thought, while the Bank of
Japan is unlikely to implement any other drastic easing steps
when it announces its policy decision (Friday)," said
Christopher Vecchio, currency analyst at DailyFX in New York.
    About US$4.95 billion in euros changed hands on Thursday,
using Reuters Dealing data, compared with US$4.615 billion the
same day a week ago. There was about US$2.07 billion in yen
trades, compared with US$2.832 billion on Thursday last week,
using Reuters Dealing data.
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