US Dollar on track for 3rd week of losses against the euro

Frankfurt (May 3)  The dollar extended its losses against the euro Friday, and appeared set to finish lower against the shared currency for the third straight week.

But the performance of the dollar wasn’t all bad. The U.S. currency appeared likely to finish the week with gains against the yen, snapping six straight weeks of declines. The dollar has traded in a narrow range of between ¥118 and ¥120 for most of the year.

It extended Thursday’s gains against the pound after weaker-than-expected manufacturing report. It has recovered about half of its losses from earlier in the week.

“The pound has had a nice run recently, so I think when you see a negative print, it’s a good opportunity to go ahead and take profit, especially with the political risk the election poses next week,” said John Doyle, director of markets at Tempus Inc.

Analysts expected thin trading volume Friday, with Japanese markets closed for the Golden Week holiday. Markets in Mexico and in most of Europe were closed for May Day.

The euro EURUSD, +0.29% traded at $1.1247, just below its highest intraday level since late February. It traded at $1.1214 Thursday. The pound GBPUSD, -0.74% traded at $1.5227, compared with $1.5354. The dollar USDJPY, +0.50% traded at ¥119.86, compared with ¥119.45.

Since falling to a 12-year low against the dollar in mid-March, the euro has appreciated more than 7%.

In the U.S., traders were looking ahead to the ISM manufacturing index, scheduled for release at 10 a.m. Eastern. The index is a widely watched gauge of manufacturing activity. A strong reading would lend more credibility to the argument, advanced by Federal Reserve policy makers, that weak growth in the first quarter was caused by transient factors—increasing the likelihood that they could decide to raise interest rates at their June meeting, which would benefit the dollar.

“Any positive reading in ISM should help stem this relentless euro rise especially if the market narrative begins to change to the idea of a [second-half] U.S. rebound,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note to clients.

Economic data released Thursday showed Chicago-area manufacturing activity expanding for the first time in three months, weekly jobless claims falling to their lowest level in 15 years, and a larger-than-expected increase in a closely watched measure of wage inflation.

The ICE U.S. Dollar Index DXY, -0.04% a measure of the dollar’s strength against a basket of six currencies, rose 0.2% to 94.7680.

Source: IndiaBullion