US Markets

Dollar inches up as investors unwind positions after weakest month in a decade

Credit: REUTERS/

The dollar was slightly higher against a basket of currencies on Monday as investors unwound some recent short positions following the currency's weakest monthly performance in a decade.

By Caroline Valetkevitch

NEW YORK, Aug 3 (Reuters) - The dollar was slightly higher against a basket of currencies on Monday as investors unwound some recent short positions following the currency's weakest monthly performance in a decade.

The dollar index =USD, which measures the greenback against a basket of leading currencies, posted a more than 4% decline for July, its biggest monthly drop since September 2010.

The weakness has been tied to market expectations for further easing of U.S. monetary policy and a lack of agreement among U.S. lawmakers on further fiscal stimulus. Falling U.S. bond yields have also been cited as a factor.

The day's strength may be tied in part to investors moving out of short position, strategists said.

"Sentiment was overdone," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. "The swing in the pendulum of market sentiment hit such an extreme," which led investors to unwind short positions, he said, but he added he expects the dollar to resume its trend lower.

The dollar pared gains in the wake of U.S. economic data, and was only slightly higher by late afternoon New York trading.

U.S. construction spending fell to a one-year low in June. In a separate report, the survey from the Institute for Supply Management (ISM) showed U.S. manufacturing activity accelerated in July to its highest level in nearly 1-1/2 years, but that hiring at factories remained subdued.

The dollar index hit a session high of 93.997 and was last up 0.13% at 93.532. The dollar gave back some gains on the data, Chandler said, adding the market will focus on Friday's U.S. jobs report.

Speculators' net shorts on the U.S. dollar have soared to their highest since August 2011 at $24.27 billion, Reuters calculations and U.S. Commodity Futures Trading Commission data show. IMM/FX

At the same time, the euro last traded at $1.1760 EUR=EBS, down 0.12% on the day.

Sentiment on the euro had improved after European Union leaders agreed last month to a 750 billion euro ($882 billion) economic recovery fund while taking on debt jointly in a show of regional cooperation.

Against the Japanese yen, the dollar gained 0.1% to push past the 106-yen-per dollar mark. JPY=

On Friday, the dollar posted its biggest daily rise against the Japanese currency since March. The yen had rallied 3% in July.

On Friday Japanese Finance Minister Taro Aso described the yen's recent rise as "rapid," signaling concern that a strong currency could further damage an export-led economy already in recession.

A growing U.S. fiscal deficit to finance the stimulus prompted Fitch Ratings to revise its outlook on the United States' triple-A rating to negative from stable.

========================================================

Currency bid prices at 3:38PM (1938 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=

$1.1760

$1.1774

-0.12%

+4.91%

+1.1796

+1.1698

Dollar/Yen

JPY=

106.0000

105.8800

+0.11%

-2.63%

+106.4600

+105.5900

Euro/Yen

EURJPY=

124.66

124.68

-0.02%

+2.22%

+125.0600

+124.0200

Dollar/Swiss

CHF=

0.9178

0.9127

+0.56%

-5.17%

+0.9240

+0.9115

Sterling/Dollar

GBP=

1.3070

1.3088

-0.14%

-1.43%

+1.3111

+1.3006

Dollar/Canadian

CAD=

1.3389

1.3413

-0.18%

+3.10%

+1.3450

+1.3380

Australian/Dollar

AUD=

0.7119

0.7142

-0.32%

+1.40%

+0.7149

+0.7077

Euro/Swiss

EURCHF=

1.0793

1.0755

+0.35%

-0.54%

+1.0838

+1.0754

Euro/Sterling

EURGBP=

0.8997

0.8995

+0.02%

+6.42%

+0.9014

+0.8983

NZ Dollar/Dollar

NZD=

0.6610

0.6632

-0.33%

-1.87%

+0.6642

+0.6576

Dollar/Norway

NOK=

9.1329

9.0860

+0.52%

+4.04%

+9.1763

+9.0729

Euro/Norway

EURNOK=

10.7424

10.7416

+0.01%

+9.19%

+10.7861

+10.6923

Dollar/Sweden

SEK=

8.7510

8.7680

-0.50%

-6.38%

+8.8083

+8.7496

Euro/Sweden

EURSEK=

10.2930

10.3450

-0.50%

-1.68%

+10.3515

+10.2877

GRAPHIC: Dollar's worst monthly performance in a decadehttps://tmsnrt.rs/3k28ghc

GRAPHIC: World FX rates in 2020https://tmsnrt.rs/2RBWI5E

(Reporting by Caroline Valetkevitch; Additional reporting by Ritvik Carvalho in London; Editing by David Goodman, Hugh Lawson, Jonathan Oatis and David Gregorio)

((caroline.valetkevitch@thomsonreuters.com; +1 646 223 6393; Reuters Messaging: caroline.valetkevitch.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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