Dollar down on mixed U.S. data ahead of Fed decision

28/01/2015 06:45 AST

The U.S. dollar fell on Tuesday, with currency strategists pointing to a surprise drop in U.S. durable goods orders that is feeding into speculation the Federal Reserve might hold off on raising interest rates for longer than had been expected.

Investors have bid the dollar up, anticipating that the Fed will start to raise rates around mid-year as the U.S. economy recovers growth momentum at the same time as major central banks in Europe and Japan are loosening policies to spur activity.

A report on Tuesday showed U.S. non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 0.6 percent in December after a similar drop in November.

"I think for the long dollar position that is in the market, investors do feel comfortable taking some profit after this data. Mostly it feeds into our expectation for Friday's GDP print. Given the durables data, people are more wary of the GDP print and are lightening up their positions," said Richard Cochinos, head of Americas G10 FX strategy at Citi in New York.

The latest Reuters poll on advance U.S. fourth-quarter gross domestic product data is for 3 percent growth.

Dollar losses were trimmed after a U.S. consumer confidence report for January came in at its highest in more than seven years.

The data was released as the Federal Reserve's policy-making Federal Open Market Committee began a two-day meeting that finishes on Wednesday.

"The risk for the dollar is that the FOMC might sound a little more concerned with regard to the global economy, the impact of low energy prices on their inflation forecast, and the potential impact of the very strong dollar on the economy and the very low wage backdrop," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

"A slightly more cautious tone to the statement tomorrow would effectively push out the time line for an eventual rate hike and that has been one of the pillars of the dollar's rally," Esiner said.

The euro rose 1.24 percent to $1.13760, off the session high $1.14230 on the EBS trading platform. That pulls it further away from Monday's 11-year low of $1.1098 after voters in Greece elected an anti-bailout government.

The dollar traded down 0.52 percent to 117.85 yen. The euro gained 0.75 percent to 134.14 yen and climbed 0.90 percent to 1.02510 Swiss francs.

Reuters