Reuters: US Dollar Report: FOREX-Dollar in box seat after retail sales fuel stimulus tapering talk

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FOREX-Dollar in box seat after retail sales fuel stimulus tapering talk Aug 14th 2013, 03:10 By Hideyuki Sano and Wayne Cole TOKYO/SYDNEY | Tue Aug 13, 2013 11:10pm EDT TOKYO/SYDNEY Aug 14 (Reuters) - The dollar held broadly firm on Wednesday after racking up a third session of gains as upbeat U.S. retail data fueled talk the Federal Reserve will start trimming its stimulus next month and sent Treasury yields sharply higher. The dollar's index against a basket of currencies stood near one-week highs touched on Tuesday, with the prospect of further gains seen hinging on upcoming figures on U.S. industrial output, inflation and housing later in the week. The dollar index stood flat at 81.75, having climbed 0.5 percent overnight and almost one percent in the past three sessions. The latest boost came from a robust 0.5 percent increase in U.S. core retail sales, the biggest gain since December. That led to a 9 basis-point jump in 10-year Treasury yields to 2.72 percent, so testing a huge chart level around 2.75 percent. A break there could ultimately unleash a move toward 3 percent. Given that various Fed officials have repeatedly said the timing of reducing stimulus depends on the strength of the U.S. recovery, traders say the market will be extra sensitive to a series of data due later in the week. Wednesday will see wholesale price data while Thursday's industrial production and consumer inflation reports are likely to draw more attention. The euro slipped back to $1.3264, from a high of $1.3316 on Tuesday, though its losses were limited by a stronger reading of German investor sentiment. Traders reported stop-loss sell orders under $1.3230 and a break there could see a rewind to the $1.3155/85 zone. Strong German data also helped the euro get a lift against the yen to 130.13 yen, little changed on the day but up from the week's low at 127.95. The immediate focus for the euro is flash GDP estimate of the euro zone due at 0900 GMT, which is expected to show the currency bloc is finally recovering from recession after six quarters of contraction. The dollar dipped slightly against the yen in Asia on profit-taking after its sharp gains over the last two days. The dollar has risen to as high as 98.315, a rise of over two yen from Monday's 95.92 trough, before easing back to 98.10 yen, about 0.1 percent below late U.S. levels. Resistance was put at 98.68, with support around 97.50/60. "The dollar looks firm on the whole but it is capped by Japanese exporters' offers. Flows are limited and there's no follow-through buying in Asia," said Takahiro Suzuki, vice president of forex at Nomura Securities. The New Zealand dollar popped higher after data on domestic retail sales blew past all expectations. The kiwi firmed to $0.7988, and last stood at $0.7973, up about 0.1 percent on the day. Sales volumes jumped 1.7 percent for the second quarter while core sales climbed by the most since 2006. The upbeat result underlined expectations that the Reserve Bank of New Zealand could be one of the first central bank in the developed world to actually start tightening policy. "Very strong number, when you look across the activity indicators, things are definitely travelling at a very brisk pace," said Ben Jarman, an economist at JPMorgan. "We do think the RBNZ must be holding a hiking bias, it's just a question of how long they can stay on hold for." Link this Share this Digg this Email Reprints

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