FOREX-Dollar broadly higher as market bets on strong U.S. data

Mon Aug 12, 2013 4:46am EDT

Related Topics

* Dollar rises against currency basket
    * Retail sales, other U.S. data this week could lend support
    * Drops then recovers against yen after disappointing
Japanese growth data

    By Anooja Debnath
    LONDON, Aug 12 (Reuters) - The dollar inched higher on
Monday on expectations of strong U.S. data that could signal an
early scaling back of monetary stimulus.
    It rose 0.3 percent to 81.356, moving away from a
seven-week low of 80.868 hit last week. 
    The dollar gained against the safe-haven yen as traders
moved back in at lower exchange rates. The dollar had initially
weakened following disappointing Japanese growth data that
prompted investors to trim their exposure to risk.
 
    The dollar rose 0.5 percent to 96.79 yen, also
pulling away from a seven-week low - of 95.81 yen - set last
Thursday. 
    Market players said the near-term outlook for the dollar
would hinge on U.S. data due this week, such as Tuesday's retail
sales reading which they said was expected to be strong.
 
    "The U.S. recovery is fairly on track and probably going to
expand this quarter and this could lend the dollar support,"
said Chris Walker, FX strategist at Barclays Capital. "We look
for a full return to dollar appreciation in a couple of weeks." 
    Japan's economy grew an annualised 2.6 percent in
April-June, a third straight quarter of expansion but slower
than expected, dragging dollar/yen lower. 
    The dollar bounced back after running into bids near 96.00
yen as buyers emerged at lower levels. 
    Another factor likely to determine the near-term direction
of dollar-yen is the Tokyo equity market.
    If share prices continue to weaken on disappointing Japanese
data the yen, which usually attracts buyers in times of market
stress, could be headed for more gains. 
    "If share prices slide, the 95 yen level (for the dollar) is
right around the corner," said Satoshi Okagawa, senior global
markets analyst for Sumitomo Mitsui Banking Corporation.
    The yen has shown a strong inverse correlation to Japanese
shares in recent weeks, though Japanese data could just as
easily persuade the country's central bank to aggressively
loosen policy, which could undermine the yen.
    The euro was down 0.2 percent to $1.3308. The single
currency was under pressure after German news magazine Der
Spiegel reported on Sunday the Bundesbank was warning Greece
would need more financial assistance by early next year.
 
    The value of the dollar's net long position fell to $21.62
billion in the week ended August 6 from $24.45 billion, dropping
 for the third straight week as speculators continued to pare
bets in favour of the currency. 
    Dealers said that trend could be about to slow or end.
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