Reuters: US Dollar Report: FOREX-Dollar slides vs yen as U.S. durables disappoint

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FOREX-Dollar slides vs yen as U.S. durables disappoint Aug 26th 2013, 14:01 Mon Aug 26, 2013 10:01am 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 fell against the yen and pared back gains versus the euro on Monday after much weaker-than-expected U.S. durable goods data last month raised doubts about an early withdrawal of stimulus by the Federal Reserve. The soft report also suggested that any rollback in the Fed's asset-buying plan, if it does happen, would be incremental at best, which could weigh on a dollar that has been buoyant so far this year. 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 report, which came after soft U.S. housing numbers last Friday, added to growing evidence that the world's largest economy was on a less firm footing than many people think. "While the (durable goods) data is a notoriously volatile indicator, it is difficult to sugar coat the dismal report," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "The very weak report raised further doubts about the prospect of a reduction in Fed stimulus next month." In trading thinned by a holiday in London, the dollar fell 0.3 percent against the yen to 98.388 yen, below Friday's high of 99.15 yen, the U.S. currency's highest level since Aug. 5. The euro was flat at $1.3373, while the dollar index, which is strongly correlated with 10-year U.S. yields, was little changed at 81.354, off 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. On Monday, the benchmark yield was 2.7926 percent. "With a notably more fragile housing market the Fed will find it impossible to begin tapering bond purchases as early as September, many FX traders might argue. I am not so certain," said Ulrich Leuchtmann, currency strategist at Commerzbank. He said the Fed should start withdrawing stimulus and normalise interest rates to prevent another housing bubble, despite higher mortgage rates hitting housing demand "Should the ultra-doves maintain the upper hand in the Fed, and should they be prepared to accept a new property bubble in order to artificially lower the unemployment rate, that would be a negative signal for the U.S. currency," he said. Many still think the Fed will begin withdrawing stimulus in September, but a lot will depend on the August payrolls report due on Sept. 6. Analysts say 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." Link this Share this Digg this Email Reprints

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