Forex - Dollar softens as data cast doubts over Fed stimulus tapering

Written By Unknown on Selasa, 17 Desember 2013 | 08.10

Investing.com - The dollar moved largely lower against most major currencies on Monday after hit-or-miss economic indicators released earlier cast doubts on recent expectations for the Federal Reserve to announce plans to taper its USD85 billion in monthly asset purchases at a policy meeting this week.

Monthly asset purchases in place for a year now have weakened the dollar by depressing interest rates to spur on economic recovery.

In U.S. trading on Monday, EUR/USD was up 0.18% at 1.3766.

London-based market research group Markit reported earlier that its preliminary U.S. manufacturing purchasing managers' index declined to a seasonally adjusted 54.4 in December from a final reading of 54.7 in November.

Analysts were expecting the index to rise to 54.9 this month.

The Federal Reserve Bank of New York reported earlier that its Empire State manufacturing index came in at 0.98 in December compared to November's -2.21 reading, though analysts were expecting the index to rise to 4.75.

Separately, the Federal Reserve reported that U.S. industrial production advanced 1.1% in November after having edged up 0.1% in October, beating consensus forecasts for a 0.5% November reading.

The data encouraged investors to sell the greenback for profits until the Fed makes its policy stance clear on Wednesday.

Meanwhile in Europe, the euro saw support after Markit reported that the euro zone's composite output index rose to 52.1 in December, from 51.7 in November, its largest jump since April of 2011, indicating that European Central Bank policymakers will not need to step up stimulus measures.

New orders picked up to the highest level since mid-2011, fueling optimism that the recovery in the region will carry forward into the start of 2014.

Rising exports helped push the euro zone's manufacturing purchasing managers' index up to a 31-month high of 52.7 in December from November's final reading of 51.6, beating consensus forecasts for a 51.9 reading..

However, the service sector ticked down to a four-month low as domestic demand remained weak, coming in at 51.0 compared to forecasts for a 51.5 reading.

Germany's PMI came in at 54.2, beating market calls for a 53.0 reading.

A separate report showed that the euro zone's trade surplus rose to EUR17.2 billion in October from EUR9.6 billion a year earlier and from EUR10.9 billion in September.

Imports fell by 1.2% in October from a month earlier, while exports rose 0.2%.

Elsewhere, the greenback was down against the pound, with GBP/USD up 0.06% at 1.6304.

The dollar was down against the yen, with USD/JPY down 0.22% at 102.99, and down against the Swiss franc, with USD/CHF down 0.22% at 0.8872.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.04% at 1.0587, AUD/USD down 0.18% at 0.8952 and NZD/USD trading down 0.10% at 0.8258.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.19% at 80.22.

On Tuesday, the U.S. is to release data on consumer inflation and its current account balance.

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