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Euro dips against dollar on data

Thursday, January 02 15:47:06

The dollar rose against the euro today as an array of U.S. economic data further supported the stance for the Federal Reserve to gradually scale back its bond-buying stimulus.

The euro, the strongest-performing major currency in 2013 but historically a weaker performer at the start of a calendar year, dropped to a two-week low of $1.3634 and last traded 0.8 percent lower at $1.3648.

The U.S. dollar hit a high of 105.44 yen, its strongest level versus the Japanese currency since October 2008, before erasing gains to last trade down 0.3 percent at 104.94 yen.

Japanese financial markets are closed on Thursday and Friday for the New Year's break.

Volumes were low in late December and prices driven by factors such as euro zone banks repatriating funds to shore up their capital bases before the European Central Bank's year-end review of their assets, which supported the euro.

"Last week the market was mainly determined by position rescaling," said Ulrich Leuchtmann, head of currency research at Commerzbank in Frankfurt.

"Today is the first day where fundamentals work out again ... That's why there is pressure on euro/dollar."

Against the backdrop of a firming jobs market and brightening economic outlook, the Fed in December announced it would reduce its monthly $85 billion bond buying program by $10 billion starting this month.

U.S. construction spending rose to its highest level in nearly five years in November as a surge in private construction projects offset a drop in public outlays.

The number of Americans filing new claims for unemployment benefits fell for a second week last week, suggesting labor market conditions continue to steadily improve.

U.S. manufacturing ended the year on a high note, growing in December at its fastest pace in 11 months, while the rate of job growth was the swiftest since March, an industry report showed on Thursday.

While few analysts expect the ECB, which holds a policy meeting next week, to change interest rates in the near future, the Fed is closely monitoring the strength of the U.S. recovery to gauge the pace at which it scales back its bond-buying.