Reuters: US Dollar Report: FOREX-Dollar edges up as Fed taper debate focuses on amount

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FOREX-Dollar edges up as Fed taper debate focuses on amount Aug 26th 2013, 16:49 Mon Aug 26, 2013 12:49pm EDT * U.S. durables fall 7.3 percent in July, pressure dollar * Dollar/yen dips, still close to highest in nearly 3 weeks * Euro holds steady, dollar index all but flat By Gertrude Chavez-Dreyfuss NEW YORK, Aug 26 (Reuters) - The dollar edged higher on Monday, recouping losses against the euro as a dismal U.S. durable goods report did not alter expectations that the Federal Reserve will wind down its stimulus program next month. But analysts said the roll-back would be incremental. The durables goods data, which came after soft U.S. housing numbers on Friday, added to growing evidence that the world's largest economy was on a less-firm footing than many people think. Data showed on Monday that orders for long-lasting U.S. manufactured goods dropped 7.3 percent in July, their biggest fall in nearly a year, while a gauge of planned business spending on capital goods tumbled. The dollar fell against the yen and euro immediately following the durable goods report, but recovered in late morning trading. "The data is a sign that the uptick in interest rates is hurting an economy struggling to gain traction in positive growth territory," said Andres Bergero, chief corporate trader at Bank of the West in San Ramon, California. "The quick snapback in U.S. yields and the U.S. dollar suggests that investors are no longer simply betting on a tapering of quantitative easing, but the... taper speculation has become data-centric." Bergero said the market is convinced that tapering will happen next month, but because of the weak economic data, the reduction will be more like $10 billion, instead of the $20 billion to $25 billion estimated. The Fed's tapering will also depend a lot on the August payrolls report due on Sept. 6. Analysts said it would take a very weak reading to push back the start date. "Ultimately, we believe that timing of tapering will be less important for the dollar than the ability of the U.S. economy to generate faster growth over the last two quarters of the year," BNP Paribas said in a note. "We stick with a long dollar/yen position for now." In trading thinned by a holiday in London, the dollar index, which is strongly correlated with 10-year U.S. yields, was up 0.1 percent at 81.440, not that far from a recent one-week high of 81.719. The 10-year note yield fell on Friday after a steep drop in U.S. new home sales. The benchmark yield fell on Monday to 2.7926 percent following the U.S. durable goods data, but subsequently traded at 2.7981 percent. The euro drifted lower to $1.3367, down 0.1 percent. The dollar slipped 0.1 percent against the yen to 98.660 yen , below Friday's high of 99.15 yen, the U.S. currency's highest level since Aug. 5. It fell as low 98.19 after the durables report. Link this Share this Digg this Email Reprints

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