NEW YORK, Jan 23 — The dollar drifted higher yesterday after three straight days of losses, and riskier currencies fell, as bleak non-US economic data gave global equity markets reason to pause after another week of record highs.

As a safe haven, the US currency tends to rise in times of financial and economic stress that results in lower risk appetite.

The S&P 500 and the Dow along with US Treasury yields were lower as well, suggesting a generally sombre mood in financial markets.

The dollar did pare gains and riskier currencies cut losses earlier after upbeat US economic data — a rise in factory activity to its highest in more than 13 years in January and an unexpected 0.7 per cent gain in existing home sales.

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The greenback had fallen against a basket of currencies for the past three sessions as market optimism about new US President Joe Biden’s fiscal stimulus plans prompted traders to seek riskier assets, producing gains in currencies such as the New Zealand and Australian dollar.

But that trend paused yesterday, as market sentiment pulled back. Global shares slipped off record highs as the US dollar steadied, up 0.1 per cent on the day at 90.209.

The dollar index though still posted its biggest weekly loss since mid-December.

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“There is some indecision in the marketplace and risk sentiment has been soured a little bit,” said Amo Sahota, executive director at currency advisory firm Klarity FX in San Francisco.

“The market has probably one eye on the Fed meeting next week, where they will likely throw a little bit more caution in the marketplace given the slower vaccine rollout and prolonged virus uplift globally.”

US coronavirus deaths have now reached nearly 410,000, with close to 25 million cases.

The Federal Reserve next week will hold its first monetary policy meeting of the year and strategists expect the Fed to stay dovish, and officials “will probably note signs of slowing in the economy since the December meeting,” NatWest Markets said in a research note.

Gloomy economic data also did little to brighten the mood, as UK data showed British retailers struggled to recover in December.

Economic activity in the euro zone shrank markedly in January as stringent lockdowns to contain the coronavirus pandemic hit the bloc’s dominant service industry hard.

In afternoon trading, the dollar rose 0.3 per cent against the yen to 103.815.

Data from Japan overnight showed factory activity slipped into contraction in January and the services sector was more pessimistic as emergency measures to combat a Covid-19 resurgence dampened sentiment.

The Australian dollar fell after disappointing retail sales data, but still posted weekly gains. It was last down 0.6 per cent at US$0.7718 (RM3.12).

The New Zealand dollar was down around 0.6 per cent at US$0.7179 versus the US dollar.

The euro was little changed at US$1.2167. The single currency rose on Thursday after the European Central Bank’s policy rate announcement, with the ECB saying it might not need to use its full asset-purchase envelope.

The Norwegian crown, meanwhile, was hurt by lower commodity prices, slumping 1.1 per cent against the dollar to 8.4940. — Reuters