Dollar falls on growth doubt as yen rises

Tokyo

THE dollar fell against the yen for a third day, the longest streak in a month, after data raised concern that the US economic recovery has plateaued.

The yen rose versus most of its 16 major peers as trading patterns signalled its recent declines were excessive amid speculation that traders are reducing bearish positions into month-end. An index of the US currency was little changed as a gauge of whether US economic data has beaten or fallen short of forecasts slid to the lowest level since August.

"Softer data and falling US yields have encouraged people to unwind their long dollar positions," said Jeremy Stretch, head of foreign exchange strategy at Canadian Imperial Bank of Commerce in London. "The primary concern for the dollar was the weight of positioning, so a modest washout will be encouraging." A long position is a bet that an asset price will advance.

The Bloomberg Dollar Spot Index, which tracks the currency versus 10 major peers, dropped 0.1 per cent to 1,096.36 at 8.33 am London time. It ended the day at 1,100.97 on Nov 24, the highest close since March 2009. The dollar fell 0.3 per cent to 117.4 yen and was little changed at US$1.2497 per euro.

US financial markets are shut for a public holiday.

Citigroup Inc's Economic Surprise Index for the US, which measures whether data have been above or below analysts' forecasts, fell to 6.2 on Wednesday, the lowest since Aug 25, from 16.4 the previous day.

"Some investors might look to take some of their chips off the table following the run-up in the dollar in the past couple of months," said Michael Turner, a debt and currency strategist at Royal Bank of Canada in Sydney. "The data have turned this week in the US, but the reaction has been exaggerated."

The yen gained for the first time in four days against the shared European currency, appreciating 0.4 per cent to 146.59 per euro. It has fallen 7.1 per cent in the past month, the worst performer among 10 developed-nation currencies, according to Bloomberg Correlation-Weighted Indexes.

The yen's 14-day relative-strength index versus the dollar was at 29, near the 30 level that some traders see as a signal an asset may have fallen too far, too fast and is due to reverse course. It has been below 30 since Oct 31, when the Bank of Japan unexpectedly expanded monetary stimulus. BLOOMBERG