FX : CURRENCIES: Dollar Retreats Ahead Of Bernanke On European Data
CURRENCIES: Dollar Retreats Ahead Of Bernanke On European Data
By William L. Watts
The U.S. dollar retreated Friday, erasing an earlier rise versus the euro after an influential survey of purchasing managers indicated the single-currency region was poised to return to growth in the third quarter.
Stronger-than-expected preliminary readings in the August Markit PMI manufacturing and services indexes for Germany and France gave the euro a lift. A short while later, the flash reading for the euro zone showed the August PMI had posted a record jump to 50.
The rise from 47.0 in July marked a record monthly jump and exceeded economists' expectations for a rise to 48.3.
A reading of less than 50 means a majority of managers reported a fall in activity, while a figure of more than 50 signals expansion. The August data ended a 14-month string of readings below the 50 mark.
The euro traded at $1.4335 in recent action, up from $1.4270 in North American trade late Thursday.
"Markets were looking for much more modest gains from the region's two largest economies and the fact that the PMI surveys have now broken into expansionary territory suggests that the pace of recovery is stronger than many skeptics, including us, believed," wrote Boris Schlossberg, director of currency research at GFT.
The euro proceeded to rise above $1.43 versus the dollar as investors resumed a "pro-risk" stance, also pushing up equity markets in Europe and turning U.S. stock index futures higher.
That reversed the earlier tone, which had seen traders shying away from riskier assets as China led Asian equities lower amid concerns over a possible tightening of credit.
Schlossberg said the euro could make a run at its yearly high of $1.4444 versus the dollar, but said news out of China could still cap investors' risk appetite.
The dollar index (DXY), which tracks the greenback against a trade-weighted basket of six major currencies, traded at 78.025, down from 78.330 late Thursday. The index has lost 1.1% this week.
The pressure on the dollar allowed the British pound to turn higher. Sterling traded at $1.6567, up from $1.6516.
The dollar bought 93.68 yen, down from 94.18 versus the Japanese unit Thursday.
Markets will be watching July U.S. existing-home sales, set for release at 10 a.m. Eastern. Economists polled by MarketWatch expect sales to rise to 5 million from 4.89 million.
Attention will also turn to the Kansas City Federal Reserve Bank's annual retreat in Jackson Hole, Wyo., with Federal Reserve Chairman Ben Bernanke set to deliver the keynote address at 10 a.m. Eastern.
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