Dollar falls vs yen, euro after soft U.S. economic data

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NEW YORK (Reuters) – The U.S. dollar fell against most major currencies on Thursday, hurt by weaker-than-expected U.S. economic data that affirmed expectations the Federal Reserve will hold interest rates this year.

The signature of the President of the European Central Bank (ECB), Mario Draghi, is seen on the new 50 euro banknote during a presentation by the German Central Bank (Bundesbank) at its headquarters in Frankfurt, Germany, March 16, 2017. REUTERS/Kai Pfaffenbach

The greenback so far this week has fallen 0.4 percent, after gaining more than 1 percent the previous week, highlighting an uneven performance amid a mixed batch of U.S. economic reports.

The U.S. data came a day after minutes of the Fed’s monetary policy last month said patience was needed when it came to tightening rates, noting a pause in rate hikes gave it time to observe the effects of past increases amid a global economic slowdown.

New orders for key U.S.-made capital goods, in particular, unexpectedly fell in December, data showed on Thursday, amid declining demand for machinery and primary metals, pointing to sluggish business spending on equipment that could crimp economic growth.

“Overall, the durable goods data provide further reason to think that economic growth will soon slow to below its 2 percent potential pace, which will keep the Fed on hold throughout this year,” said Andrew Hunter, senior U.S. economist, at Capital Economics in London.

Thursday’s data also showed that Philadelphia Fed’s manufacturing activity index dropped to a reading of -4.1 this month from 17.0 in January. That was the first negative reading since May 2016.

In mid-morning trading, the dollar fell 0.2 percent against the yen to 110.63 yen, sliding for the first time in five days.

The euro also inched higher versus the dollar, up 0.1 percent at $1.1343.

The single European currency benefited from surveys that showed business activity was surprisingly firm in February, particularly in France.

French business activity rose more than expected as manufacturing growth helped offset the slack in services that has dogged firms in the wake of anti-government protests, though the German PMI number was more of a mixed picture.

“The euro’s reaction highlights the heightened sensitivity of the currency towards any good news from Europe after recent lackluster data,” said Kamal Sharma, director of G10 FX strategy at Bank of America Merrill Lynch in London.

A bunch of weak data since January has undermined support for the single currency, prompting investors to revise down their inflation expectations for the coming months and pulled core bond yields lower.

A Citibank economic surprise index shows the euro zone indicator is still wallowing near six-month lows hit last month.

The dollar index, which measures the U.S. unit against a basket of six major currencies, was little changed at 96.498.

Graphic: Citi Economic Surprise Index (

Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Saikat Chatterjee in London; Editing by Bernadette Baum