Dollar rebounds on data

By Ian Chua

SYDNEY (BestGrowthStock) – The dollar edged up against a basket of major currencies early in Asia on Wednesday in the wake of upbeat U.S. economic data, but commodity currencies were the real winners with the Australian dollar back at parity against the greenback.

U.S. retail sales rose for a fifth straight month in November, while sales for the previous two months were upwardly revised, prompting economists to ratchet up their fourth-quarter economic growth forecasts by as much as a full percentage point.

The report sent benchmark Treasury yields flying to a seven-month high just shy of 3.5 percent, prompting the dollar to reverse losses versus the yen. It also abruptly ended a short squeeze in the euro, which had been partly driven by talk of heavy buying by Asian central banks.

Despite the improving growth prospects, the Federal Reserve reaffirmed its commitment to buy $600 billion in bonds, a move that could add fuel to the economic bonfire in coming months.

The dollar was last up 0.2 percent against a basket of major currencies (.DXY: ), having climbed off a three-week low plumbed on Tuesday, continuing the wild moves seen this week due in part to thin year-end conditions.

Against the yen, the dollar rose from a one-week low at 82.82 to last stand at 83.60, little changed from late New York levels. It looked poised for yet another test of resistance above 84 yen.

Peter Frank, strategist at Societe Generale, said the dollar/yen pair looked at risk of an upward lurch from widening U.S. versus Japan rate spreads, particularly if upbeat U.S. data was repeated in the days ahead.

“Positioning is also a risk for the yen with latest IMM data showing the speculative market is still clinging on to large net long yen positions,” he said.

The immediate event risk for the Japanese currency is the Bank of Japan’s closely watched tankan survey due at 2350 GMT. Analysts expect the report to show confidence at Japanese firms fell for the first time in seven quarters.

The euro retreated from a one-month high near $1.35 to trade at $1.3373, failing to stay above $1.3466, the 38.2 percent retracement of the November fall, a level likely to now act as near-term resistance.

Mounting optimism about the U.S. recovery coupled with recent solid growth data from China, and the fact that Beijing has so far refrained from lifting interest rates, saw commodity currencies back in the limelight.

The Australian dollar has risen 1-1/2 cents so far this week to reclaim parity with the greenback. It hit a one-month high of $1.0030 overnight, before edging back to $0.9990.

“I think this will set us up for a retest of the highs near $1.0200,” a trader said.

(Editing by Wayne Cole)

Dollar rebounds on data