By James Ramage
The dollar fell against major currencies Tuesday, although its
losses were less severe after moderately stronger second-tier data
showed a U.S. economy emerging from its winter doldrums.
The National Association of Realtors reported existing-home
sales fell 0.2% in March from one month earlier, compared with
economists' expectations they would fall by 0.7%. At the same time,
the Federal Reserve Bank of Richmond's survey on manufacturing
showed the central Atlantic region experienced an uptick in
activity in April from the previous month.
The Federal Reserve has used unemployment, inflation and other
data as gauges for assessing how quickly the U.S. economy is
improving, and how soon it can wind down its stimulus program and
eventually raise interest rates from near zero. Dollar investors
are eager to see higher interest rates, which would enhance returns
on dollar-denominated assets and increase demand for the
greenback.
The dollar clawed its way to trade flat against the yen at
¥102.62, versus ¥102.47 before the reports. The greenback was
trading at $1.3816 against the euro before the data and was down
0.1% at $1.3804 in late trade.
Although it has strengthened incrementally against the yen and
the euro since April 10, the dollar continues to struggle to break
away from weaker trading ranges against major currencies. Investors
haven't shown a commitment to betting the Federal Reserve will
raise interest rates sooner than mid-2015, which would boost the
dollar.
"The Fed's guidance right now means more than the slightly
positive data," said Robert Lynch, currency strategist at HSBC.
"The Fed providing guidance that it wants to keep monetary policy
accommodative, and interest rates low, would help explain why the
dollar is weaker against at least some currencies."
The Australian and New Zealand dollars both gained 0.4% against
the greenback after investors positioned themselves for expected
interest-rate moves. The Aussie increased to $0.9365, while the
kiwi rose to $0.8598.
On Wednesday, Australia will report inflation numbers for the
first quarter, which many forecast to rise above the Reserve Bank
of Australia's target band of 2% to 3%. Mr. Lynch said a high
number could pressure the central bank to cast aside its neutral
monetary policy stance and raise interest rates in a shorter time
frame than previously expected.
Australia's key interest rate is at a record low of 2.5%.
Investors also anticipate New Zealand's central bank on Thursday
could raise its benchmark interest rate by a quarter of a
percentage point for a second time since March, to 3%. Much, but
not all, of the expected rise has already been priced into the
market, strategists said.
Write to James Ramageat james.ramage@wsj.com