TOKYO (Reuters) – The dollar languished around a three-month low against the euro in early Asian trade on Monday after downbeat U.S. economic data bolstered expectations that the Federal Reserve will wait longer to raise U.S. interest rates.
Industrial production fell for a fifth straight month in April and consumer confidence sagged in early May, quashing any remaining expectations that the U.S. central bank will begin raising rates as early as next month and backing the case that policymakers would hold off until September or December.
Data from the Commodity Futures Trading Commission released on Friday showed that speculators further pared back their bullish dollar bets in the week ended May 12, pushing the net long position down for the seventh straight week to their lowest in nine months.
Against a basket of six major currencies, the dollar edged up about 0.2 percent to 93.230 <.DXY>, after posting its fifth straight weekly decline. Its longest losing streak in four years brought it as low as 92.133 last Thursday, its lowest in nearly four months.
“While the dollar is still vulnerable to some additional near-term losses, we argue on both fundamental and technical grounds, it is premature to invest as if a new bear market for the dollar has begun,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note to clients.
Expectations of divergent monetary policy remain in place in the longer term, with the Fed still poised to eventually tighten as the European Central Bank and the Bank of Japan maintain their quantitative easing policies to shore up their respective economies.
The dollar’s 11-month rally saw it rise 27.5 percent between May 2014 and March 2015, while its recent pullback has been about 7.4 percent, Chandler said. The minimum Fibonacci 38.2 percent retracement lies near 92.20, he added, with resistance now seen near 94.00.
The dollar’s recent slump against the common currency came even against the backdrop of Greece’s ongoing financial crisis, as it conducts talks with its lenders over reforms.
German politicians kept up the pressure on Greece over the weekend to implement reforms, with Economy Minister Sigmar Gabriel warning Athens in an interview that a third aid package would not be on the cards unless the Greeks made some changes.
The euro was buying $1.1445 in early Asian trading, nearly flat on the day, and not far from its Friday peak of $1.1468.
The dollar edged up about 0.1 percent against its Japanese counterpart to 119.34 yen <JPY=>, around the middle of a familiar range that has held since last month.
The Bank of Japan will meet and announce its latest statement on monetary policy on Friday, and is widely expected to maintain the current pace of monetary expansion.
BOJ Governor Haruhiko Kuroda said last week that he did not see any immediate need for further monetary easing as the broad trend of inflation was steadily improving.
(Editing by Shri Navaratnam)
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