Dollar Falls as Investors Close Out Year End Positions
The US dollar fell broadly in thin year end trading as investors closed out year end positions. Traders said Thursday’s volatile currency movements had little meaning and are uncertain whether the dollar can maintain its recent rally. The dollar rallied in December as better than expected US economic data prompted speculation that the Federal Reserve will raise rates in early 2010. Lee Hardman of Bank of Tokyo-Mitsubishi UFJ stated, “We could some a partial retracement of December’s sharp dollar rally early in 2010, but ultimately further improved U.S. economic data will fuel Fed tightening expectations and support the dollar.” Trade was extremely light in advance of year end holidays in Asia and Europe. Japanese markets reopen January 4th.
Better Than Expected UK Housing Data
The pound rose against the dollar and euro as recent data showed that better then expected home prices in the UK. The pound posted the first yearly gains against both currencies since 2006. The pound is on track for its first weekly gain vs. the dollar since November 13th as the UK based Nationwide Building Society said that home prices increased 0.4% better than the 0.3% that had been forecast. Jeremy Stretch of Rabobank International in London stated, “The fact that the housing market performed better than expected is certainly providing some degree of support.” The pound last traded at $1.6206, an 11% gain against the dollar for the year.
Dollar at 3 1/2 Month High vs. Yen
The greenback hit a three and a half month high vs. the Japanese yen on year end buying and positive US economic and employment data. Recent data showing U.S. Midwest business activity grew more than expected helped the dollar in currency markets despite very thin trading. Amelia Bourdeau of UBS said, “The trading ranges have been quite large today. It’s end-of-the-year positioning and fund managers are closing their portfolios. There’s also the view that the U.S. is recovering and this month we’ve seen strong U.S. data support the dollar.” The December US jobs report is due January 8th and the data is expected to further support the perception that the US economy is recovering.
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