Dollar Steady on Taper Conundrum and Other Top Forex News

The U.S. dollar held steady against most other major currencies on Friday, after mixed data disappointed the market. Adding to worries that the nation’s economic recovery is stalling, which may cause the Fed to extend the $85 billion dollar a month bond buying program for a little longer.

The day got off to a bad start after the University of Michigan said its consumer sentiment index fell to 80.0 in August, down from a reading of 85.1 the previous month. Analysts had expected the index to rise to 85.5 this month.

Things didn’t get any better after official data showed that U.S. building permits rose 2.7% to 0.943 million units in July, disappointing expectations for an increase of 2.9% to 0.945 million units. The previous month’s figure was revised up to 0.918 million units from 0.911 million.

The report also showed that housing starts rose 5.9% to 0.896 million units last month, confounding expectations for a 8.3% increase to 0.900 million units. The previous month’s figure was revised up to 0.846 million units from 0.836 million.

However it wasn’t all bad news, the Bureau of Labor Statistics said that non-farm productivity rose 0.9% in the second quarter, beating expectations for a 0.6% gain, after a 1.7% decline in the previous quarter.

The data caused the dollar to fluctuate for most of the day, with EUR/USD hitting 1.3380 during the morning session, but falling back in the afternoon. Ending the day down 0.10% at 1.3333, after the European Central Bank announced that the current account surplus narrowed to EUR16.9 billion in June, down from EUR19.5 billion the previous month.

Official data also showed that European consumer price inflation remained unchanged, despite rising food prices, at an annualized rate of 1.6% in July, in line with expectations.

In other news the greenback strengthened against the Loonie after Canada posted weak manufacturing data, USD/CAD climbing 0.29% to 1.0337, and the Kiwi was hit after an earthquake struck near the capital Wellington, NZD/USD ended the session down 0.43% to 0.8109.

More Coverage of Today’s Top Story

  • Marc Chandler: Markets limp into weekend. – An eerie calm, after yesterday’s dramatic swings, has settled over the capital markets. The U.S. dollar itself is little changed against the major and most emerging market currencies, consolidating yesterday’s losses.
  • FT: Dollar falls on rising Treasury yields. – The dollar lost most of its ground late in the US session after data supporting the case for the Federal Reserve to begin tapering its asset purchases in September drove a sell-off in the U.S. Treasuries and equities markets.

More Top Stories:

Trading Floor: Why the euro’s set to fall. – The euro’s rallied fairly strongly over the past few weeks but it’s definitely headed lower by year’s end. That’s according to Saxo Bank’s Head of FX Strategy, John Hardy.

Trading Floor: USD love, where oh where has it gone? – The unloading of stale USD longs is likely to continue as far as I’m concerned, and the turn? Well, how about the September Federal Reserve meeting? Yeah I think so. Will the Fed reduce purchases then? No. But will it be enough to put the fear of God into the market and hence get the USD bulls excited once again? Yes!

The Australian: Australian dollar lower despite help from commodities. – The Australian dollar is slightly lower after recovering most of the losses it made after the release of strong US jobs figures.

Reuters: New Zealand dollar falls after quake near Wellington. – New Zealand’s dollar fell around a third of U.S. cent on Friday after a strong earthquake struck near the country’s capital of Wellington, though there were no immediate reports of damage.

WSJ: Canadian dollar down after weak Canadian, U.S. data. – The Canadian dollar is moderately lower in morning trade on Friday and is near its session low after some disappointing domestic and U.S. economic data. Gold futures rise after mixed U.S. data. – Gold futures were higher on Friday, after the release of mixed U.S. economic reports eased expectations for the Federal Reserve to soon begin tapering its stimulus program. EUR/USD edges lower in cautious trade. – The euro edged lower against the U.S. dollar on Friday, ahead of euro zone consumer price inflation data, as investors remained cautious amid ongoing uncertainty over the future of the Federal Reserve’s stimulus program.

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