By James Ramage
The dollar shuffled between small losses and gains against the
euro and other rivals on Tuesday as investors remained uncertain
about the direction of the U.S. economy and the timing of an
expected rise in borrowing costs.
The dollar traded flat versus the common currency, with one euro
buying $1.0741, remaining between $1.05 and $1.10 as it has since
February. The Wall Street Journal Dollar Index, which pits the
greenback against a basket of 16 widely traded currencies, inched
up 0.1% to 87.29 and is up 5% this year.
The dollar has struggled to gain traction against its rivals as
softer-than-expected U.S. data over the past few weeks have sown
doubts among investors that the economy is on strong enough footing
for the Federal Reserve to raise interest rates anytime soon.
"There's still concern over whether the moderation we've seen in
the U.S. economy will be more persistent than both we and the Fed
expect," said Brian Daingerfield, currency strategist at RBS
Securities. "Until we see more certainty in the trend of the U.S.
economy, we'll see choppy trading in the dollar."
An absence of new economic numbers has complicated investors'
outlook. That could change next week as investors look forward to
measures of U.S. growth and manufacturing, as well as a meeting of
the Fed's monetary policy committee.
Still, most investors are confident in the dollar's longer-term
prospects as they believe the Fed remains on track to raise
short-term interest rates for the first time since 2006 while other
major central banks hold to loose monetary policy to boost growth
and inflation. Elevated U.S. rates would mean higher returns on
assets denominated in dollars, attracting investors to the U.S.
currency.
The dollar gained 0.4% versus the yen, rising to Y119.68, as
investors bet on further easing to the Bank of Japan's monetary
policy after Japanese Prime Minister Shinzo Abe nominated Yukitoshi
Funo, a senior adviser of Toyota Motor Corp., a beneficiary of the
weaker currency, to join the central bank's policy board this
summer. Mr. Funo would succeed Yoshihisa Morimoto, a board member
who opposed future expansion of the central bank's massive
asset-purchase program, when Mr. Morimoto's term expires June
30.
Write to James Ramage at james.ramage@wsj.com