U.S. Markets

Dollar falls as soft U.S. data turns back Fed gains

NEW YORK (Reuters) - The dollar fell broadly on Friday after weaker-than-forecast data on housing and consumer sentiment cast a risk-off sentiment over U.S. assets.

A U.S. five dollar note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration

The greenback gave back most of the previous day’s gains, easing toward levels from earlier this week that were the lowest since November.

Disappointing economic readings and the lack of progress on fiscal stimulus from Washington have overshadowed the likelihood of more rate hikes from the Federal Reserve.

The government said U.S. home construction fell in May for a third straight month, to its lowest in eight months. The University of Michigan said its gauge on consumer sentiment deteriorated in early June.

“It raises some doubt on U.S. growth for the rest of the year,” said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.

The dollar index .DXY was down 0.3 percent at 97.126, and on track for a 0.14 percent decline on the week.

The dour U.S. data boosted the yen, which had slid to a two-week low versus the dollar.

“The move in the yen very much coincided with a strengthening of bonds in the U.S., which also coincided with a selling off in (U.S.) equity markets,” said Axel Merk, president and portfolio manager at Merk Hard Currency Fund in Palo Alto, California. “My guess would be that the risk-off environment prevailed.”

Earlier, the yen had weakened after Bank of Japan Governor Haruhiko Kuroda said there was “some distance” to achieving the BoJ’s inflation target of 2 percent, and it was “inappropriate” to say how the Bank would exit its massive stimulus program as domestic inflation has remained sluggish.

That ran contrary to market speculation in the past month that the BoJ could be considering its own plan for eventually withdrawing emergency stimulus for the world’s third largest economy.

The euro rose 0.35 percent against the yen to 124.04 yen EURJPY= after touching a near two-week high earlier Friday.

The common currency EUR= was up 0.4 percent versus the dollar at $1.1191, but about a cent below a seven-month peak of $1.1296 hit before the Fed's widely expected rate hike on Wednesday.

Reporting by Dion Rabouin; Additional reporting by Ritvik Carvalho in London, Tokyo Markets team; Editing by Chris Reese and David Gregorio