US dollar malaise deepens as economic data falls short of forecasts

 A Pakistani currency dealer counting US dollars at an exchange in Karachi on Dec 17.
A Pakistani currency dealer counting US dollars at an exchange in Karachi on Dec 17.PHOTO: AFP

TOKYO (BLOOMBERG) - The US dollar may have trouble escaping from its year-end malaise after a gauge of whether US economic data is beating forecasts slumped to the lowest since June.

The US currency is headed for its biggest monthly loss since April versus the euro and since August against the yen, in a month when the Federal Reserve has raised interest rates for the first time in almost a decade. That is as a Citigroup measure of how US economic indicators compare with forecasts, known as the Surprise Index, heads for its second monthly decline.

"The pace of further Fed rate hikes will be the big market theme, and naturally the US economic data will be part of that," said Mr Keisuke Hino, a foreign-exchange trader at Mizuho Bank in New York. "With yields rising this much but dollar-yen not able to gain, it suggests to me there's further downside for the currency pair."

The US dollar has dropped 3.4 per cent this month to US$1.0931 per euro as of 10.35am in Tokyo. It has declined 2.1 per cent to 120.51 yen in the period. The greenback ended Tuesday at US$1.0920 and 120.46 yen.