Dollar falls as Goldman feeds risk appetite
U.S. data beat expectations, but corporate earnings anxiety limits gains.
 |
| Click the chart to view foreign exchange rates. |
NEW YORK (Reuters) -- The yen fell on Tuesday as earnings of Goldman Sachs surpassed expectations, stoking modest hopes for an economic recovery and boosting investors' appetite for stocks and higher-yielding assets.
But traders were cautious ahead of earnings news from other U.S. banks while lackluster data from Germany weighed on the euro, keeping it rooted in a broad range against the dollar.
The slight rise in risk appetite supported higher-yielding currencies and those tied to commodity prices such as the Canadian dollar, which hit a three-week high earlier against the greenback.
The Japanese yen and the U.S. dollar tend to fall when risk appetite rises as investors target higher-yielding currencies and assets such as stocks and commodities.
A report on Tuesday showed better-than-expected June U.S. retail sales, but traders noted that much of the 0.6% rise in retail sales was driven by higher gasoline prices.
"Retail sales were better than expected, so that's a bit of good news, but there has been little follow-through as the market is uncertain which way it wants to trade," said Greg Salvaggio, vice president of trading at Tempus Consulting in Washington.
Salvaggio also said that data showing a sharp rise in U.S. producer prices last month, which pushed government bond yields to rise, may stoke inflation fears.
Other traders noted the thin summer trading conditions, which adds up to a euro stuck in a broad $1.3850-$1.4050 range.
In late afternoon trading in New York, the euro was 0.3% lower at $1.3940 and slightly higher against the yen at 130.12 yen.
Against the yen, the dollar rose 0.4% to 93.35 yen.
A 33% rise in Goldman Sachs' (GS, Fortune 500) quarterly earnings lifted some spirits, though market participants remained cautious ahead of reports this week from other banks, including Citigroup Inc. (C, Fortune 500) and JPMorgan Chase & Co (JPM, Fortune 500).
"The focus will remain for now on corporate earnings, with U.S. equities likely to be the biggest factor weighing on the greenback." said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon.
"If earnings disappoint, as many suspect, the dollar has room to rally on rising risk aversion and falling stock prices," he added. "If earnings exceed expectations, the dollar may come under renewed selling pressure."
Currencies seen as higher risk did better as the Canadian dollar rose more than 1% to a three-week high of C$1.1345 per U.S. dollar.
Australia's dollar rose 0.8% to $0.7894, and sterling added 0.3 % to $1.6282. Strong Australian business confidence data and better-than-expected UK retail sales and home price data added to demand for both.
The euro's woes were tied partly to a monthly poll of economic sentiment from German think-tank ZEW, which defied upbeat market expectations and fell for the first time since October.
The ZEW report "was much lower than what was expected, but it is still a figure that shows more optimism than pessimism toward economic recovery," said Dan Cook, a senior market analyst at IG Markets Inc. in Chicago.
Investors' attention now will turn ahead to readings on U.S. consumer prices, industrial output and minutes from the Federal Reserve's last policy meeting all due on Wednesday. 
-
These 5 cities have the fastest-growing foreclosure rates. And they're not the usual suspects. More -
Now you can get the $8,000 credit through June 2010 -- or $6,500 if you're not a first-time buyer. More -
Home prices are forecast to plummet, but these 7 cities are predicted to post gains. More -
Home prices have grown in the beer-guzzling heartland and fell in the wine-sipping coastal states. More -
Investors think Detroit's foreclosed houses are a deal. Would you buy this one for $6,900? More -
Economic growth, affordable wages -- these spots have what entrepreneurs need to thrive. More
