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Dollar continues to pare losses with eyes on Fed

Published 07/26/2016, 10:53 AM
Updated 07/26/2016, 10:53 AM
Dollar regains some strength on upbeat U.S. housing data

Dollar regains some strength on upbeat U.S. housing data

Investing.com - The dollar continued to pare losses against the other major currencies on Tuesday, supported by upbeat U.S. housing sector data, while investors awaited the conclusion of the Federal Reserve’s monthly policy meeting on Wednesday.

The U.S. Commerce Department said new home sales rose by 3.5% to 592,000 units last month. New home sales in May were revised up to 572,000 units, from the prior reading of a 6.0% slump to 551,000 units.

Analysts had expected a 1.6% advance from the initial May number to a total of 560,000 units.

Separately, the Conference Board said its index of consumer confidence inched down to 97.3 this month from a reading of 97.4 in June, whose figure was revised down from a previously reported 98.0. Analysts expected the index to fall to 95.9 in July.

Market participants were eyeing the Fed’s upcoming policy decision as a recent string of pbeat U.S. data continued to support expectations for a rate hike by the U.S. central bank in the near future.

While most investors expect the Fed to leave its monetary policy unchanged this week, it could give hints on the timing of future rate hikes.

EUR/USD held steady at 1.0991, off Friday’s one-month lows of 1.0951.

Meanwhile, USD/JPY was down 1.09% at 104.65, after hitting a one-and-a-half week low of 10400 earlier in the day.

The yen was boosted by a Nikkei report saying the Japanese government planned a direct fiscal stimulus of around 6 trillion yen ($56 billion) over the next few years, disappointing expectations for as much as 10 trillion to 20 trillion yen in fiscal stimulus.

The dollar had climbed to as high as 107.49 last week, as investors’ expectations had mounted for Tokyo to unveil an aggressive stimulus package.

Market players are also looking ahead to the Bank of Japan’s policy meeting later this week. The BOJ is widely expected to ease policy further at the conclusion of its meeting on Friday, which could include a rate cut deeper into negative territory and additional asset purchases.

The pound edged lower, with GBP/USD down 0.13% at 1.3122, while USD/CHF climbed 0.56% to 0.9914.

Expectations for a rate but by the Bank of England at its August policy meeting mounted after the Financial Times reported that Martin Weale, a member of the BOE's rate-setting committee, dropped his opposition to an easing and now favored immediate stimulus.

The Australian and New Zealand dollars remained stronger, with AUD/USD up 0.63% at 0.7516 and with NZD/USD advancing 0.79% to 0.7051.

Earlier Tuesday, Statistics New Zealand said the country’s trade surplus narrowed to NZ$127 million in June from NZ$358 million the previous month, compared to expectations for a trade surplus of NZ$125 million.

Elsewhere, USD/CAD eased up 0.08% to trade at 1.3227, nearg the previous session’s four-month peak of 1.3243.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.09% at 97.19, after hitting session lows of 96.90.

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