Dollar dips after homebuilding data, on track to snap winning streak

NEW YORK (Reuters) - The dollar reversed gains on Wednesday, losing steam after data showed U.S. homebuilding fell last month, and was on track to snap four days of gains, even as higher U.S. Treasury yields provided some support.

FILE PHOTO: A U.S. Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration/File Photo

The dollar index, which tracks the greenback against six major currencies, was down 0.12 percent at 93.371, after rising as high as 93.797. It was 0.61 percent higher against the Japanese yen at 112.87 yen.

U.S. homebuilding fell to a one-year low in September as Hurricanes Harvey and Irma disrupted the construction of single-family homes in the South, suggesting housing probably remained a drag on economic growth in the third quarter.

The dollar index may have hit technical resistance at around the 93.80 level, which could have restrained the currency’s rise at least in the near term, Eric Viloria, currency strategist at Wells Fargo Securities in New York, said.

“I think we are looking at generally consolidative movement in the U.S. dollar,” he said.

Through Tuesday, the greenback had risen 0.53 percent over the last four sessions, boosted by rising U.S. treasury yields.

“It’s all about the yields this week, so far,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. “The dollar has drawn support from the broad move higher across the curve in U.S. bonds.”

Benchmark 10-year U.S. Treasury yields hit a six-day high and 30-year bond yields hit a five-day high on Wednesday.

The outlook for continued policy normalization by the Fed and chatter about U.S. President Donald Trump possibly nominating a less dovish replacement for Janet Yellen as Fed Chair when her term expires in February, have helped boost yields, Esiner said.

Meanwhile, sterling dipped to a six-day low after data showed British wage growth was still lagging well behind inflation, feeding doubts over the Bank of England’s interest rate outlook.

The pound fell as low as $1.3141, before recovering ground to trade little changed on the day at $1.3198.

The Canadian dollar rose against its U.S. counterpart, boosted by higher oil prices and data showing a surprise rise in domestic manufacturing sales.

Reporting by Saqib Iqbal Ahmed; Editing by Chizu Nomiyama and Susan Thomas