The dollar declined slightly on Monday, a day characterized by quiet activity as many markets remained closed for Christmas holidays.
The U.S. Dollar Index (DYX), which gauges strengthen of the greenback against 16 trade-weighted rivals, was last seen down 0.02% at 102.90 on Monday. Last Friday, ICE Dollar Index, which measures the dollar against six trade partners, retreated 0.1% to 103.
US Dollar Index has risen about 6% since U.S. election in November.
In currency pairs, USDJPY was last seen down 0.24% at $117.06 on Monday, widening the gap from the pair’s nearly 11-month high of 118.65 reached last week.
The dollar eased against the yen ahead of the release of Japan’s consumer inflation reading.
EURUSD was little changed at 1.0455, but that signals a rebound from the 13-year trough of 1.0352 set last week.
Euro slightly recovered from last week’s decline.
GBPUSD was down 0.02% at 1.2275 on Monday, pulling from a 7-month low of 1.2229 set on Friday.
Profit-taking moves rattle the dollar
The weakness in the dollar seen in the recent days has been linked to profit-taking as investor move to lock in gains following recent dollar surge. Slightly mixed U.S. economic data at the end of last week also appeared to weigh on the greenback.
This week’s events that could affect dollar strength
A set of economic reports are slated for release this week and their quality will affect the strength of the dollar.
Monday, Dec. 26: Japanese inflation data
Japan is reporting year-over-year changes in consumer prices. In the previous update Japan’s consumer price index declined 0.4% and economists are expecting the same level of decline. A better than the forecast reading would lift the yen and hurt the dollar as the markets would see that as a sign of improving economic fundamentals in Japan. However, a stronger yen could complicate the country’s economic recovery because Japan needs a weaker currency to make its export trade more competitive.
Tuesday, Dec. 27: U.S. consumer confidence report
The U.S. is set to release consumer confidence report on Tuesday. The previous reading was 107.1, but economists are forecasting a reading of 108.5 in the latest update. A downbeat consumer confidence report would cause the dollar to slide or derail its recovery from the lows it has sunk into in the recent days as investors take profits.
Wednesday, Dec. 28: U.S. Pending home sales
The U.S. pending home sales report is set for release this Wednesday, Upcoming Release: The previous month-on-month update on pending home sales put the metric at 0.1%, but economists are expecting a reading of 0.5%. Signs of an improving housing market could lift the dollar as it would add to the hopes for economic prosperity in the U.S. as a new administration takes the White House. A
Housing bust triggered the global financial meltdown of 2008 and that explains why housing data is under the radar of many investors.
Dollar surges on hopes of bright U.S. economic future
The U.S. dollar index has risen more than 6% since the U.S. election early last month. The greenback has been supported by expectations for fiscal stimulus under Trump administration.
The dollar has also benefited from economic uncertainties in many global economies. Against the euro, the dollar has rallied amid a rising wave of Eurosceptic sentiment in the Eurozone following the stunning Brexit referendum outcome. Europe has a busy election calendar in 2017, which some investors believe will continue to put pressure on euro and that has sparked a selloff of the common currency. Some analysts are predicting euro-dollar parity in 2017.