Dollar Rises on Firm Consumer-Sentiment Data
MarketWatch.com, January 19, 2007
NEW YORK (MarketWatch) -- The dollar rose against other major currencies Friday, after a report showed U.S. consumer sentiment improved to a three-year high.
The consumer sentiment index rose to 98.0 in January from 91.7 in December, according to research at the University of Michigan released on Friday. The increase was well above the consensus forecast of economists polled by MarketWatch who had expected sentiment to rise to 92.0. The current conditions index rose to 112.5 in January, the highest since July 2005, while the expectations index rose to 88.7, the highest since December 2004.
"The much stronger than expected" sentiment data "matched the rumored number exactly," said Brian Dolan, director of research at Forex.com, a division of Gain Capital. "Lower oil prices, milder weather, strong labor market all point to a positive US consumer mindset, but it does not feel sufficient to jar the market out of the ranges we have established this week."
In New York trading, the euro stood at $1.2924, compared with $1.2959 late Thursday. The dollar was quoted at 121.45 yen, compared with 121.22 yen.
The British pound traded at $1.9718, compared with $1.9741. The dollar changed hands at 1.2516 Swiss francs, compared with 1.2469 francs.
The euro fetched 156.94 yen, compared with 157.11 yen.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman, noted that "it has been difficult in recent sessions to get a clear sense of the dollar's underlying direction."
"Making it particularly difficult" are the Bank of England's surprise rate increase, the European Central Bank's signal that rates probably won't rise in February, and the Bank of Japan's decision to keep rates steady, he said.
"The price-action response to these developments have been clear --sterling higher, yen lower, and the euro buffeted by the cross-rate implications," he said.
Elsewhere, the yen stabilized, after touching multi-year lows against the dollar, the British pound and the Australian dollar in the prior session after the Bank of Japan voted to leave interest rates unchanged at 0.25% -- the lowest among all major economies.
Most analysts say that the Japanese currency will remain weak in the near term and that expectations for a tightening of credit have shifted to the February policy-board meting.
"With the rate news now behind us, the pair is likely to range-trade between [120 and 122] until Japanese economic data provides a clearer picture on whether the bank will finally act in February or will be forced to hold off for yet another month," said Boris Schlossberg, senior currency strategist at FXCM, in a note.
