NEW YORK (AP) – The dollar mostly retreated during New York trading Tuesday, declining against major rivals when an earlier advance failed to carry the greenback past key technical levels versus theeuro and yen.
The euro had dipped to $1.1056, its lowest point since April 29, just as the New York session got underway, but then managed to regain much of the lost ground, although ending slightly lower on the day and remaining close to three-and-a-half-month lows against the dollar.
Meanwhile, heavy buying of yen in the afternoon pushed the Japanese currency up to one-week highs versus the dollar and one-month highs against the euro. A big order from a major U.S. bank was cited by traders as being partly behind the selloff of the dollar to around 118.25 yen and the euro to around 131.60 yen late Tuesday.
The dollar’s runup in recent days has been largely attributed to the improved economic outlook, and analysts are starting to question whether a recovery is going to entice foreign investors back into U.S. assets at a time when rising Treasury yields are offering greater return.
The U.S. data released Tuesday presented a mixed picture. U.S. housing starts were up a surprisingly strong 1.5 percent in July, according to the Commerce Department. However, the University of Michigan’s mid-month report on consumer sentiment showed that its main index had fallen to 90.2 in August, from 90.9 the month before.
Market professionals said profit-taking after a recent period of dollar strength was the most likely factor behind the retreat, while thin market conditions have contributed to volatile trading conditions.
In late New York trading, the euro was quoted at $1.1128, down from $1.1153 late Monday. The dollar was quoted at 1.3983 Swiss francs, up from 1.3885, and 1.3983 Canadian dollars, up from 1.3902. The British pound rose to $1.5891 from $1.5886.
The dollar was quoted at 118.40 yen, down from 119.49 yen late Monday.
A broad range of international and Japanese investors encouraged by yet another surge on the Nikkei to buy the Japanese currency. Like last week, the heavy yen-buying was conducted not against the dollar, but on the crosses, mainly the euro, sterling, and the Australian dollar.
The Nikkei’s 1.4 percent climb Tuesday further steadied the index above the 10,000 mark, an important psychological level for investors, especially domestic investors, only too happy to put their money into strong domestic markets that carry no foreign exchange risk, traders said.
Traders reported hedge funds shifting out of euro zone, U.K., and Australian assets, and buying into Japanese equities. This yen appreciated sharply against these currencies, which strengthened it against the dollar too.
The yen’s sharp gains, however, will raise fears of intervention from Japanese authorities to stem its rise.
