By Deborah Levine and Michael Kitchen, MarketWatch
SAN FRANCISCO (MarketWatch) — The dollar gains ground after a U.S. economic report was better than expected, relieving some worries that a standoff in Washington about taxes and federal spending has hampered business activity or consumer confidence.
The euro briefly tapped the psychologically important $1.30 level after news of a deal to clear the way for Greece’s next aid payment.
The euro EURUSD -0.26% fell to $1.2943, having gradually given up gains seen in Asia and versus $1.2961 in late trading Monday in North America. It hasn’t closed above $1.30 since Oct. 23, according to FactSet.
The ICE dollar index DXY +0.33% , which measures the greenback against a basket of six major currencies, rose to 80.355 from 80.227 late Monday.
Orders for U.S. durable goods were flat in October, defying economists’ forecast for a decline, mainly because of slack demand for autos and aircraft and a reversal in defense orders. See: U.S. durable-goods orders flat in October.
But excluding the volatile defense and transportation industries, so-called core capital orders jumped 1.7%. That category is seen as an indicator of the health of the broader U.S. manufacturing sector.
“Given the uncertainties surrounding the resolution of the fiscal cliff, this report should be viewed as modestly encouraging news on the outlook for the factory sector,” said economists at RDQ Economics.
Separate reports showed U.S. home prices continued to improve in September and consumer confidence rose this month. See: Consumer confidence hits postrecession peak.
FISCAL CLIFF | Fiscal-cliff complete coverage »
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• 10 people who led us to the cliff
• Bernanke presses lawmakers
• Buffett calls for millionaire's tax
• What fiscal cliff would cost you
Investors will still largely focus on any news about negotiations between the White House and Congress on the so-called fiscal cliff — a series of tax and spending measures that expire at year-end and threaten to push the U.S. back into a recession.
Still, the U.S. dollar is mainly influenced by the relative attractiveness of economic prospects -- not the absolute outlook, noted Sameer Samana, international strategist for Wells Fargo Advisors.
In other words, as long as the U.S. is doing better than other countries, the dollar should see support. And indeed, the economies of the euro zone, Japan and Great Britain are doing worse.
“While the U.S. could be in better shape, it remains attractive from a relative standpoint,” he wrote in a report. “Interest-rate differentials have been moving in the favor of the U.S. as Japan has maintained near-zero rates while the euro-zone and the U.K. have also been moving lower.”
But the $1.30 level remains elusive for the common currency, said analysts.
“It appears that there is some determined selling interest up at $1.30, including some big players who are protecting options positions,” wrote Michael Derks, chief strategist at FxPro, in emailed remarks.
In addition, he said investors will likely refocus on Spain after Catalonian elections over the weekend resulted in big wins for pro-independence parties. Catalan President Artur Mas has been pushing for a referendum on independence for the region from Spain.
The dollar’s loss extended a downward trend since the middle of last week, when the index sat well above 81. Crédit Agricole strategists said the greenback’s decline had “almost wiped out half its rally since Oct. 17” and looked likely to continue in the short term.
“Most commentators are ascribing [dollar] weakness to the improving risk appetite, but [...] the reality is that there is probably a bout of profit-taking rather than any major shift in [dollar] sentiment,” the Crédit Agricole strategists said.
Among other major currency pairs, the British pound GBPUSD -0.01% edged up to $1.6031 from $1.6015 late Monday, when the Bank of England surprisingly named Bank of Canada head Mark Carney to its top post. Picking Carney is one of Osborner’s better choices.
Against the Japanese yen, the dollar USDJPY +0.21% traded at ¥82.25 compared with ¥82.17.
Deborah Levine is a MarketWatch reporter, based in San Francisco. Follow her on Twitter @dlevineMW.Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles.
SAN FRANCISCO (MarketWatch) — The dollar gains ground after a U.S. economic report was better than expected, relieving some worries that a standoff in Washington about taxes and federal spending has hampered business activity or consumer confidence.The euro briefly tapped the psychologically important $1.30 level after news of a deal to clear the way for Greece’s next aid payment.
The euro EURUSD -0.26% fell to $1.2943, having gradually given up gains seen in Asia and versus $1.2961 in late trading Monday in North America. It hasn’t closed above $1.30 since Oct. 23, according to FactSet.
The ICE dollar index DXY +0.33% , which measures the greenback against a basket of six major currencies, rose to 80.355 from 80.227 late Monday.
Orders for U.S. durable goods were flat in October, defying economists’ forecast for a decline, mainly because of slack demand for autos and aircraft and a reversal in defense orders. See: U.S. durable-goods orders flat in October.
But excluding the volatile defense and transportation industries, so-called core capital orders jumped 1.7%. That category is seen as an indicator of the health of the broader U.S. manufacturing sector.
“Given the uncertainties surrounding the resolution of the fiscal cliff, this report should be viewed as modestly encouraging news on the outlook for the factory sector,” said economists at RDQ Economics.
Separate reports showed U.S. home prices continued to improve in September and consumer confidence rose this month. See: Consumer confidence hits postrecession peak.
FISCAL CLIFF | Fiscal-cliff complete coverage »
• Do nothing ahead of 'cliff'?
• 'Cliff' will clip Powerball winner
• Norquist says GOP won't cave
• 10 people who led us to the cliff
• Bernanke presses lawmakers
• Buffett calls for millionaire's tax
• What fiscal cliff would cost you
Investors will still largely focus on any news about negotiations between the White House and Congress on the so-called fiscal cliff — a series of tax and spending measures that expire at year-end and threaten to push the U.S. back into a recession.
Still, the U.S. dollar is mainly influenced by the relative attractiveness of economic prospects -- not the absolute outlook, noted Sameer Samana, international strategist for Wells Fargo Advisors.
In other words, as long as the U.S. is doing better than other countries, the dollar should see support. And indeed, the economies of the euro zone, Japan and Great Britain are doing worse.
“While the U.S. could be in better shape, it remains attractive from a relative standpoint,” he wrote in a report. “Interest-rate differentials have been moving in the favor of the U.S. as Japan has maintained near-zero rates while the euro-zone and the U.K. have also been moving lower.”
Greece, Spain
The brief pop for the euro during Asian trading hours followed news that Greece’s creditors reached a long-awaited deal to pave the way for Athens to receive fresh financial aid. See: Euro zone, IMF agree on Greece debt deal.But the $1.30 level remains elusive for the common currency, said analysts.
“It appears that there is some determined selling interest up at $1.30, including some big players who are protecting options positions,” wrote Michael Derks, chief strategist at FxPro, in emailed remarks.
In addition, he said investors will likely refocus on Spain after Catalonian elections over the weekend resulted in big wins for pro-independence parties. Catalan President Artur Mas has been pushing for a referendum on independence for the region from Spain.
The dollar’s loss extended a downward trend since the middle of last week, when the index sat well above 81. Crédit Agricole strategists said the greenback’s decline had “almost wiped out half its rally since Oct. 17” and looked likely to continue in the short term.
“Most commentators are ascribing [dollar] weakness to the improving risk appetite, but [...] the reality is that there is probably a bout of profit-taking rather than any major shift in [dollar] sentiment,” the Crédit Agricole strategists said.
Among other major currency pairs, the British pound GBPUSD -0.01% edged up to $1.6031 from $1.6015 late Monday, when the Bank of England surprisingly named Bank of Canada head Mark Carney to its top post. Picking Carney is one of Osborner’s better choices.
Against the Japanese yen, the dollar USDJPY +0.21% traded at ¥82.25 compared with ¥82.17.
Deborah Levine is a MarketWatch reporter, based in San Francisco. Follow her on Twitter @dlevineMW.Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles.
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