MW: Dollar consolidates as risk-sensitive traders assess direction
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar was little changed versus major rivals Friday, consolidating as investors weighed their appetite for higher-yielding currencies and other assets perceived to carry more risk.
Risk-happy traders were happy to push the dollar back down Thursday after data showed the U.S. economy returned to growth in the third quarter with a 3.5% rise in gross domestic product.
But willingness to continue piling into riskier assets faded in Asian trade Friday as the Japanese yen gained ground on a hawkish, or more anti-inflationary, tone from the Bank of Japan, said Boris Schlossberg, director of currency research at GFT.
An unexpected drop in German retail sales trimmed support for the euro, he said. See full story.
The euro had pushed to a 14-month high above the psychologically important $1.50 level last week, but then turned south as equity markets stumbled.
The dollar index (DXY 76.01, +0.09, +0.12%) , which tracks the performance of the U.S. unit against a basket of other major currencies, traded at 75.928, down slightly from 75.979 in North American trade late Thursday.
The euro was off slightly at $1.4794, down from $1.4828 Thursday.
The British pound slipped to $1.6515, compared to $1.6538 Thursday.
Against the Japanese currency, the dollar fell 91.20 yen from 91.47 yen.
Strategists said U.S. data on September personal income and spending at 8:30 a.m. Eastern, along with the Chicago-area purchasing managers' survey for October at 9:45 a.m. and the revised October Michigan consumer sentiment reading at 10 a.m. could set direction for the rest of the trading day.
"Yesterday's GDP print was a welcome boost for the recovery bulls, but the data is of course backward looking and in order for the rally to continue markets will have to see further proof of U.S. economic expansion," Schlossberg said.
The Bank of Japan began its gradual pullback from credit markets Friday, announcing it will end one of its special liquidity-boosting measures while extending another one, and left its overnight-call-rate target at 0.1%.
The central bank said it will allow its temporary program to purchase outright corporate bonds and commercial paper expire at the end of December as scheduled. It had originally been scheduled to expire at the end of last month, but the central bank extended it in July.
