Dollar Falls As Aussie, Kiwi Score Gains

First Published Tuesday, 29th January 2013 05:04 pm - © 2013 Dow Jones


By William L. Watts and Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) -- The U.S. dollar lost ground versus major rivals Tuesday, while the Australian and New Zealand currencies gained after upbeat economic data from the two South Pacific nations.

The ICE dollar index (DXY), which measures the greenback against a basket of six major global currencies, fell to 79.616 from 79.790 in North America late on Monday.

The dollar extended losses after a report showed U.S. consumer confidence in January fell to the lowest level since 2011. The Conference Board said its consumer confidence index fell to 58.6 this month, missing analysts' estimates of 64.3. The December figure was upwardly revised to 66.7.

"The increase in the payroll tax has undoubtedly dampened consumers' spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock," said Lynn Franco, economic indicators director at the Conference Board.

The WSJ Dollar Index , which captures the U.S. currency's moves against a slightly wider basket of rival units, slipped to 70.86 from Monday's close at 71.04.

U.S. stocks, meanwhile, remained near five-year highs after the consumer confidence report. The S&P 500 index (SPX) rose 0.1% to 1,501 and the Dow Jones Industrial Average (DJI) traded up 0.2% at 13,908.

The report about the downbeat mood of consumers arrived as U.S. monetary policy makers gathered for a two-day meeting. Economists widely expect the Federal Reserve to maintain its aggressive bond-buying program until there are signs the economy is recovering at a stronger and broader pace.

The Fed is expected to release a statement on Wednesday at 2:15 p.m. Eastern.

Most currency majors on Tuesday traded in "relatively quiet ranges...The main exceptions were NZD [New Zealand dollar] and AUD [Australian dollar], which both outperformed after firmer domestic data," said Sue Trinh, currency strategist at RBC Capital Markets.

The Australian dollar (AUDUSD) traded at $1.0461 in recent action versus $1.0408 in North American action late Monday. A survey by National Australia Bank showed an improvement in business confidence to a level of +3 in December, well above the -9 reading for November.

"As one of the foremost high-beta currencies, the [Australian dollar] is especially sensitive to the perceived performance of the American and Chinese economies, both of which have looked more resolute of late," said Michael Derks, chief strategist at FxPro in London.

Meanwhile, the New Zealand dollar (NZDUSD) appreciated to $0.8368 compared with $0.8318 after official data showed the country posted a trade surplus of 486 million New Zealand dollars last month, significantly higher than the median forecast of a NZ$125 million deficit during the month.

The data could see a softening in Reserve Bank of New Zealand Gov. Graeme Wheeler's recent stance at this week's policy meeting, wrote strategists at Lloyds Bank in London: "He had viewed that the strength of the New Zealand dollar had undermined export earnings and encouraged demand for imported goods."

The euro (EURUSD)(EURJPY) fetched $1.3475 versus $1.3457, and 122.20 yen, up from Yen122.13. The dollar (USDJPY) traded at Yen90.67 compared with Yen90.76.

Among Asian currencies, the Indian rupee (USDINR) strengthened after the Reserve Bank of India cut its key lending rate by a quarter-percentage point to 7.75%, as was widely expected. The dollar fell to 53.72 rupees from 54.05 rupees before the reduction, which is expected to aid economic growth amid easing inflationary pressures.

Elsewhere, the British pound (GBPUSD) was trading at $1.5746, compared with $1.5693.

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