Dollar Heads for Monthly Loss as U.S. Data Damp Fed Rate Path

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The dollar is heading for the first monthly loss since June as disappointing data raised doubts about the U.S. economic outlook and the willingness of the Federal Reserve to raise interest rates.

A gauge of the U.S. currency has declined 1.2 percent in April amid evidence growth in the world’s largest economy remains uneven. Fed policy makers want to see signs of growth and inflation on the rise before committing to the first interest-rate increase in almost a decade.

“The dollar rally is slowing down, especially against the euro, and pausing after the bull run up until now, given lackluster data,” said Koji Fukaya, chief executive officer and currency strategist at FPG Securities Co. in Tokyo.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, added 0.1 percent to 1,186.17 as of 12:27 p.m. in Tokyo. The dollar rose 0.3 percent to $1.0794 per euro. It was little changed at 119.55 yen after weakening 0.3 percent on Thursday.

The Fed has ruled out raising interest rates when it next meets April 28-29. Policy makers have left the door open to move in June.

A Labor Department report Thursday showed applications for U.S. unemployment benefits increased by 1,000 to 295,000 in the week ended April 18. The median forecast in Bloomberg survey of economists called for 287,000. Separately, Commerce Department data showed purchases of new U.S. homes slumped more than forecast in March from a seven-year high.

‘Data Dependent’

“Since the Fed is data dependent, markets will react positively to good news and negatively to bad,” said Kazuo Shirai, a Los Angeles-based trader at MUFG Union Bank NA. “A firm durable goods report may spur dollar buying.”

Bookings for goods meant to last at least three years rose 0.6 percent in March, swinging from a 1.4 percent drop in the prior month, according to a Bloomberg survey before the report due Friday.

The dollar has gained 19 percent during the past 12 months, according to Bloomberg Correlation-Weighted Indexes, driven by stronger growth and projections the Fed will raise interest rates this year for the first time since 2006, while central banks around the global add to monetary stimulus. The yen has declined 0.1 percent, while the euro has slumped 9.7 percent in the period.

The dollar’s gain against the yen has also stalled with receding expectations for the Bank of Japan to further add to its already unprecedented stimulus, FPG’s Fukaya said.

BOJ Outlook

BOJ Governor Haruhiko Kuroda said on Thursday the timing of achieving the central bank’s 2 percent inflation target may occur early in the fiscal year that starts in April 2016 and reiterated that inflation will likely pick up in the second half of this fiscal year. The BOJ unexpectedly expanded stimulus in October, spurring a yen decline.

The BOJ holds a policy meeting on April 30 and releases its outlook on prices and the economy.

The euro gained 0.9 percent versus the greenback on Thursday. Greek Prime Minister Alexis Tsipras urged an acceleration of talks with the country’s creditors to make a deal by the end of this month.

Euro-area finance ministers will meet in Riga, Latvia, Friday to attempt to persuade Greece to commit to economic reforms so that aid payments can be released before the country runs out of money.

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