Dollar Up Vs. Yen, Gives Up Euro Gains
The U.S. dollar edged higher against the yen Monday as traders appeared to shrug off further signs of slowing Chinese growth and tensions over Russia's annexation of the Crimea region.
The G-7 industrialized nations' leaders on Monday decided to skip the scheduled G-8 meeting in Sochi because of Russia's annexation of Crimea, which was viewed by the U.S. and several Western countries as illegal. U.S. President Barack Obama arrived in Europe Monday for a weeklong trip in which he will attempt to strengthen international support for measures to isolate Russia by pushing for tougher sanctions.
In China, the preliminary HSBC Purchasing Managers' Index indicated manufacturing activity fell to an eight-month low and that output fell for a third straight month.
The dollar fetched 102.24 yen (USDJPY), up from Yen102.15 in North American trade late Friday.
Data from Europe were also a disappointment. A preliminary March purchasing managers index for the euro zone slipped from a 32-month high in February, but remained in expansion territory. Economists had expected a modest rise. But the euro (EURUSD) recovered from earlier losses against the dollar, rising to $1.3838 $1.3796 late Friday.
The European Central Bank was in focus after Erkki Liikanen, a member of the governing council, said the region's interest rates wouldn't rise for "an extended period of time" and added that the central bank is ready to act if needed, according to The Wall Street Journal.
The Federal Reserve, however, could raise interest rates sooner than many had expected, according to comments from Fed Chairwoman Janet Yellen last week. Yellen said there could be an approximate lag time of six months between the end of the Fed's bond purchases and the first interest-rate hike, setting the stage for an increase in rates as early as next spring.
San Francisco Fed President John Williams sought to counter that view on Monday, saying there was no suggestion from the central bank that rate hikes could come sooner than previously expected.
Still, the potential for divergence in the direction of interest rates between the euro zone and the U.S. could push the euro as low as $1.30 by year-end, according to from Capital Economics. The firm said in a note Monday it expects another rate cut from the ECB in 2014, likely to the refi rate.
U.S. stocks fell Monday. U.S. data released Monday included a positive preliminary reading on manufacturing.
The British pound (GBPUSD) rose to $1.6499 from $1.6486.
The Australian dollar (AUDUSD) rose to 91.31 U.S. cents from 90.81 U.S. cents late Friday, despite the weak Chinese data. The Australian dollar is often seen as a proxy for the Chinese economy due to Australia's tight trade relationship with the country.
Nevertheless, the Aussie "remains well supported," with overhead resistance at the 200 day moving average at 91.39 U.S. cents, said Jeremy Stretch, currency strategist at CIBC in London.
Data from the Commodity Futures Trading Commission shows that short bets on the Australian currency were trimmed at their fastest rate in six months, further creating a supportive backdrop for the currency as market participants ponder the timing of rate hikes by the Australian central bank, he said in a note.
The ICE dollar index (DXY), which measures the U.S. unit against a basket of six major rivals, fell to 79.923 from 80.089 late Friday. The WSJ Dollar Index , which measures the currency against a broader basket, fell to 73.42 from Friday's 73.60.