Dollar Loses Traction, Longs Bail as Data-Driven Gains Evaporate

  • Greenback snaps 4-day winning streak as quick profits booked
  • Dollar-yen falters, option-related offers cap near 115.00

ING's Turner Says March Hike Would Be Good for Dollar.

Hard-won dollar gains triggered by strong U.S. economic data turned into quick losses Wednesday as the greenback fell back from its session high, trapping intraday longs and forcing some to bail.

The Bloomberg dollar index was down less than 0.1 percent after gaining as much as 0.5 percent to a February high as data showed stronger-than-expected January retail sales and consumer inflation at its highest since 2013. The dollar had risen in four straight sessions, though with an air of caution, a trader in London said. Leveraged accounts have been adding to dollar longs since the start of the week but some are quick to book profits as soon as momentum falters, said traders in London and Europe.

  • Wednesday’s economic data came ahead of a second day of testimony from Federal Reserve Chair Janet Yellen, who Tuesday said that the Fed was nearing its inflation goals and it would be a mistake to wait too long to further withdraw accommodation. Yellen’s remarks shifted the dollar toward greater data-dependency as investors try to gauge the timing of the next Fed rate hike, a trader in London said
  • After the CPI and retail sales reports, March rate hike odds were 44 percent from around 30 percent before Yellen spoke Tuesday, while the June odds rose to 80 percent, according to Bloomberg data. The dollar pared its subsequent drop after Fed presidents Eric Rosengren and Patrick Harker joined the chorus of central bank officials seeing the need for a faster pace of hikes
  • USD/JPY fell to a fresh low at 113.87 in afternoon trading, a sharp reversal from the 114.96 high set early in the day before offers capped the move, the USD touching its highest since Jan. 30; around $4b of 115.00 option strikes are set to expire on Friday and may have seen some protective USD selling on approach
  • The dollar also approached technical resistance at its 55-DMA at 115.03, a breach of which may allow gains toward the Jan. 19 high at 115.62
  • EUR/USD rose to new high 1.0609 after dropping to 1.0521, its lowest since Jan. 11
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