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USD: Dollar pulls back amid disappointing data

H.S. Borji
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The US dollar index declined for a third consecutive day Wednesday, peeling back from the 88.00 level amid largely disappointing data that threatened to undermine the near-term outlook on the recovery.

The dollar index, a weighted average of the greenback’s performance against a basket of currencies, declined 0.31 percent to 87.65.

The greenback was lower across the board. The euro advanced for a third consecutive day, as the EURUSD continued to build momentum. The pair advanced 0.28 percent to 1.2515.

The British pound pulled ahead Wednesday, as cable broke the 158.00 barrier for the first time in two weeks. The GBPUSD would subsequently consolidate at 1.5785, advancing 0.49 percent.

The USDJPY peeled back from the 118.00 region, declining 0.3 percent to 117.56.

In North America, the greenback was steady against its Canadian counterpart, as the USDCAD traded around 1.1248, little changed from the previous close.

The bullish US dollar was undermined by a heavy slate of economic data, which revealed weakness in the recovery efforts.

US durable goods orders rebounded faster than forecast in October, but gains in transportation masked the overall weakness for most goods.

Orders for manufactured goods meant to last three years or more rose 0.4 percent in October, led by a spike in defense aircraft orders. Orders outside transportation declined 0.9 percent. Meanwhile, nondefense capital goods orders excluding aircraft – a gauge of business spending that excludes defense and aerospace purchases – declined 1.3 percent, following a similar drop the previous month.

Separately, jobless claims climbed 21,000 to a seasonally adjusted 313,000 in the week ended November 22, the Labor Department reported today. That was the first time since early September initial jobless claims had risen above 300,000. The bigger than expected spike probably won’t detract from the view the labour market was still improving in the fourth quarter. Overall job creation slowed in October, although the rate of growth was well above the 200,000 mark.

Consumer spending rebounded in October, suggesting some improvement in consumer confidence leading up to the holiday season. However, the increase of 0.2 percent was slightly below forecast. Income growth continued to disappoint, rising a modest 0.2 percent in October following a similar gain in September.

Consumer confidence improved last month, according to the Reuters/University of Michigan consumer sentiment index. The closely followed gauge improved 1.9 points to 88.8. Economists had forecast an increase to 90.0.

On Tuesday the Conference Board said consumer confidence declined sharply in November, as the short-term outlook waned. The consumer confidence index reached 88.7, falling from October’s seven-year high of 93.7.

Meanwhile, new home sales rose in October, although the September gain was revised downward, the Commerce Department said in another report. The sale of new homes increased 0.7 percent to a seasonally adjusted annual rate of 458,000, a sign more homebuyers were taking advantage of declining mortgage rates.

Pending home sales, a forward-looking indicator of home sales, declined 1.1 percent in October, but remained higher than year-ago levels, the National Association of Realtors reported today.

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