World Economy

Dollar Hit by Solid Eurozone Data

The greenback skidded 0.5% to a one-week low against yen  and stood at 112.56 yen.The greenback skidded 0.5% to a one-week low against yen  and stood at 112.56 yen.

The dollar nursed its losses on Wednesday after taking a hit from solid eurozone economic data, a fall in US yields on heightened turmoil in Washington and downbeat housing data that reduced expectations of a Federal Reserve rate hike in June.

The dollar index scaled a 14-year peak of 103.82 on January 3 on hopes for tax reform and stimulus measures from the administration of US President Donald Trump, Reuters reported.

The index, which tracks the US currency against a basket of six major rivals, last stood at 97.929, down 0.2% on the day. The dollar had skidded 0.5% to a one-week low against its perceived safe-haven Japanese counterpart and last stood at 112.56 yen.

“The political shenanigans in Washington concerning Trump appear to be denting appetite for the US dollar at the moment, but it has run into technical selling as well,” said Sue Trinh, head of Asia FX strategy at Royal Bank of Canada in Hong Kong. “The move in FX looks to be exaggerated by the addition of the systematic selling of the US dollar by technical trading accounts,” she said.

US Treasury yields fell after data showing US homebuilding unexpectedly dropped in April, adding to a recent spate of mixed data that has raised doubts about the US monetary policy outlook. Separate data showed US factory production recorded its biggest increase in more than three years in April.

The yield on benchmark 10-year notes fell to a two-week low of 2.291% in early Asian trade, down from its US close on Tuesday of 2.327%. It last stood at 2.301%.

Interest rate futures showed the market was still pricing in a nearly three in four chance that the Fed will raise rates in June, down from over 80% a week ago, according to CME Group’s FedWatch Tool.

Investors were pricing in slightly below an even chance for two or more rate increases in 2017, despite central bankers’ stated view that they will hike two more times in 2017.

The euro added 0.1% to $1.1095 after earlier touching $1.1098, its highest since November 2016.

Against the resurgent Japanese currency, the euro tumbled 0.4% to 124.88 yen, as investors locked in gains following the European currency’s move to a 13-month high of 125.815 on Tuesday.

Data on Tuesday showed the eurozone growing at 1.7% year-on-year in the first quarter of 2017.

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