LONDON, Jan 4 (Reuters) - The dollar dipped on Monday, reversing earlier gains as caution set in ahead of key U.S. data, leaving investors wary of pushing the U.S. currency up further after it hit a four-month high versus the yen.
Optimism about the prospects for a U.S. recovery have supported the dollar recently but analysts said more evidence of a strengthening economy was needed to justify further gains.
Investors were jittery in a busy week for U.S. data that will culminate in monthly jobs data on Friday.
This week's releases begin with the Institute for Supply Management's December manufacturing index, due at 1500 GMT, which is expected to show a reading of 54.3 versus 53.6 in November. ECONUS
A euro zone purchasing managers' survey which confirmed the region's manufacturing sector expanded at its fastest rate in 21 months [ID:nLDE6030JH] also boosted the euro against the dollar, while better-than-forecast UK data lifted sterling.
"People are coming back after the new year, but the market has been slow to settle back in and there's a reluctance to chase dollar strength in a week which includes U.S. payrolls data," said Daragh Maher, deputy head of forex strategy at Calyon.
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