Dollar recovers from
two-week lows in holiday-thinned market
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[January 02, 2017]
By Jemima Kelly
(Reuters) - The dollar recovered from a two-week low against a basket of
six major currencies on Monday, though trade was thin with many markets
closed for the New Year holiday.
The greenback had soared to 14-year highs in December, boosted by market
expectations that the U.S. Federal Reserve will hike rates as many as
three times this year, and that President-elect Donald Trump will stoke
growth and inflation with a program of fiscal expansion.
The dollar finished the year with an almost 4 percent annual rise, the
fourth consecutive year of gains
But the index that measures the currency against six major rivals lost
more than 1 percent during the last three days of last week, its
weakness exacerbated on Friday during a flash surge for the euro in low
volumes of trading in Asia.
The single currency jumped two full cents to as high as $1.07, before
quickly retreating, prompting analysts to draw parallels with a "flash
crash" in October that briefly knocked almost 10 percent off the value
of Britain's pound.
On Monday the euro fell 0.4 percent to $1.0513 despite strong
manufacturing data for the currency bloc, while the dollar index climbed
half a percent to 102.68, close to the 14-year peak of 103.65 it touched
on Dec. 30.
"In the last days of 2016 we saw the dollar retreat somewhat, and there
might be some sense of a correction from Europe this morning. I don't
see any fundamental drivers for the moves," said Commerzbank currency
strategist Esther Reichelt in Frankfurt.
Data released on Friday showed speculators once again taking a bullish
stance on the dollar, increasing their bets in the week up to last
Tuesday after cutting their long positions for the first time since
October in the previous week.
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A customer checks his U.S. dollar notes in a bank in Cairo, Egypt
March 10, 2016. REUTERS/Amr Abdallah Dalsh
Swedish crown rose half a percent to a 3-1/2-month high of 9.5285 crowns per
euro after the purchasing managers' index for the manufacturing sector rose to
60.1 points in December, up from 57.3 the previous month.
The main data focus for the week will be Friday's U.S. non-farm payrolls report.
week's NFP figure is likely to confirm (the) assumption ... that if the FOMC
(Federal Open Market Committee) hopes to get at least two hikes in during the
year, one of them should be out of the way by the middle of the year," wrote
FXPrimus's head of investment research, Marshall Gittler.
A gun attack in Istanbul that killed 39 people was seen having little impact on
the currency market, with the Japanese yen - traditionally used as a safe haven
- falling against the dollar and the Turkish lira slipping only 0.4 percent.
"The market is unfortunately getting increasingly used to such events - it
barely reacts to them anymore," said Commerzbank's Reichelt. "When we had that
attack in Berlin recently, there was barely any move - the euro moved a few
Sterling edged down 0.2 percent to $1.2299.
(Editing by John Stonestreet and Richard Lough)
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