Dollar on the backfoot again, euro at one-week highs

SYDNEY Tue Nov 26, 2013 6:17pm EST

A U.S. dollar note (bottom) is pictured alongside other currencies including (L-R) the Australian Dollar, Singapore Dollar, Korean Won and China's Yuan in this picture illustration taken in Washington, October 14, 2010. REUTERS/Jason Reed

A U.S. dollar note (bottom) is pictured alongside other currencies including (L-R) the Australian Dollar, Singapore Dollar, Korean Won and China's Yuan in this picture illustration taken in Washington, October 14, 2010.

Credit: Reuters/Jason Reed

SYDNEY (Reuters) - The dollar wallowed at one-week lows against a basket of major currencies on Wednesday, undermined by lower Treasury yields after a batch of data failed to sway markets one way or the other over when the Federal Reserve will scale back stimulus.

The dollar index fell as low as 80.599 .DXY and last stood at 80.649, well off this week's peak of 81.023. Against the yen, the dollar retreated to 101.27 from a six-month high of 101.91 reached on Monday.

Renewed pressure on the greenback helped the euro hit a one-week high of $1.3575, bringing in sight last week's peak of $1.3584 and this month's high of $1.3589.

U.S. data on Tuesday showed consumer confidence fell as Americans worried about their future jobs and earnings prospects, but the housing market provided a more encouraging reading with permits for future home construction rising to a near 5-1/2 year high.

U.S. Treasury yields slipped with the benchmark 10-year touching a one-week low of 2.69 percent. Fed funds futures maturing in 2015 added to gains and the December 2015 contract hit a new high, suggesting the market expects U.S. rates to stay low for longer.

But traders said market conviction was lacking given the Thanksgiving holiday on Thursday and an absence of any data shock to drastically change expectations that the Fed will taper its bond-buying program early next year.

"The dollar is not really strengthening as yet because rates are still very low at the front-end and the Fed continues to emphasize they are going to stay low," said Greg Gibbs, senior strategist at RBS in Singapore.

"U.S. data have also been mixed lately. Ultimately the dollar will require strong data to rally, particularly against the euro."

The one clear trend in the market at the moment is to sell the Australian dollar on any bounce, a development that is sure to delight the country's central bankers who have long argued the currency's strength is an impediment to a broad economic recovery.

The Aussie dollar fell below 91 U.S. cents for the first time since early September, extending its pullback from last week's high of $0.9448. It last stood at $0.9125.

Key for the Aussie this week is a quarterly reading on corporate investment on Thursday that could help reveal just how fast the mining boom is cooling, and whether other business sectors are stepping up to fill the gap.

Any disappointment could see the Aussie fall further, which, ironically would be good news for the non-mining sectors particularly those exposed to exports.

(Editing by Shri Navaratnam)

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