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Dollar falls vs yen after US durable goods report

NEW YORK - The dollar fell versus the Japanese yen on Wednesday as a weaker-than-expected reading on new orders for U.S. durable goods added to fears about the U.S. economic outlook.

Demand for the dollar also rose against the euro as a rally in the single currency stalled and investors awaited the release of the Federal Reserve’s reading on regional economic conditions, known as the Beige Book, later in the session.

Analysts said the Fed is likely to report softer economic conditions, which may add to investors’ overall risk aversion.

“The U.S. data now is the main focus in the forex markets, and it continues to come on the disappointing side,” said Amelia Bourdeau, a currency strategist at UBS AG in Stamford, Connecticut.

Investors are lacking “conviction” and trading in major currency pairs will be limited to narrow ranges, she added.

“We are past the good news from Europe on the stress tests and earnings, which helped the euro, and I’m not sure if even the U.S. GDP report on Friday will be able to break that pattern,” Bourdeau said.

In morning trading in New York, the dollar was 0.3 percent lower at 87.61 yen. It touched a session low at 87.48 yen after a report showed new orders for long-lasting U.S. manufactured goods unexpectedly fell for a second straight month in June, posting their biggest decline since August.

The euro also fell after the report to trade 0.1 percent lower at $1.2979. The single currency touched an 11-week high against the dollar at $1.3045 on Tuesday, helped by strong bank earnings and gains in European equities, following last week’s favorable results of regulatory stress tests.

Markets seemed comfortable with euro/dollar around 1.30, but investors were still wary of opening up new long euro positions that would take it much higher, said BNY Mellon’s Michael Woolfolk.

“We came a long way this year, from $1.40 to below $1.20 in the euro, and a lot of that was based on the fear factor. So the retracement has been merely people taking out a lot of those short positions,” he added.

Woolfolk said it will take a change in risk sentiment to start a new trend in the pair.

Traders said an option barrier at $1.3050 would need to be taken out for a move toward Fibonacci resistance at $1.3125, which is a 38.2 percent retracement of the December-June move.

Large option expiries were reported by traders at $1.3000 and $1.2850, potentially slowing the euro’s gains on the day.

Elsewhere, the Australian dollar slid 0.9 percent to $0.8934, having dropped from a 11-week high of $0.9069 the previous day.

Australian consumer prices rose much less than expected last quarter, and core inflation slowed to its lowest in more than three years.