NEW YORK (Reuters) – The dollar traded lower on Monday morning after weak results from a regional manufacturing survey added to doubts sowed by grim data last week that the U.S. recovery is on shaky grounds.
The New York Fed’s Empire State business conditions index fell to 3.7 in August versus 17.2 in July, and far lower than the 15 points forecast by a Reuters survey of economists. The reading indicates a slowdown in the manufacturing sector though the results were partially offset by strong housing data released earlier on Monday.
U.S. homebuilder confidence rose for a third straight month in August to match a record high as record-low interest rates spur a surge in customer traffic, especially in suburban markets that are growing in appeal as a result of the coronavirus pandemic.
Against a basket of currencies <=USD> the dollar traded 0.16% lower at 92.869, roughly in the middle of the range it has held since dropping to a two-year low in late July.
The moves in the dollar index were muted as uncertainty kept a lid on sentiment ahead of a week that includes the release of minutes of the U.S. Federal Reserve’s last policy meeting and the U.S. Democratic Party’s nominating convention.
“The U.S. dollar nursed a weak bias with attention on U.S. politics and Fed policy,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
“The dollar favored the lower end of the range after U.S. retail sales last week underwhelmed and increased doubts about the durability of America’s economic recovery from the coronavirus-induced recession.”
The United States and China postponed a Saturday review of their Phase 1 trade deal, people familiar with the plans told Reuters, citing scheduling conflicts. The delay in the review bolstered the trade-sensitive Australian dollar.
The Australian dollar <AUD=> inched up to a one-week high of $0.723. The oil-sensitive Canadian dollar <CAD=> also edged 0.49% higher to C$1.320 per greenback.
Markets are also looking to the Fed minutes, due to be released on Wednesday, for any clues about an anticipated shift in the policy outlook.
Speculation is rife the U.S. central bank will adopt an average inflation target, which would seek to push inflation above 2% for some time to make up for the years it has run below.
Graphic: World FX rates in 2020 https://graphics.reuters.com/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html
(Reporting by Kate Duguid in New York and Ritvik Carvalho in London; Editing by Paul Simao)