Dollar falls after weak US data

The dollar dropped against the yen on Friday, extending falls from a one-month high hit the previous day on disappointing news on the US housing sector and steep losses on Wall Street. US jobless claims have jumped and the pace of existing home sales has tumbled to a 10-year low, data showed on Thursday, reminding investors of the problems plaguing the world's largest economy.
The yen rose broadly as Asian equities fell and triggered the unwinding of carry trades, which consist of selling low-yielding currencies to buy higher-yielding currencies and assets. "There is some continuation today of a situation where the yen is bought on risk reduction as equities are sold," said Tokichi Ito, deputy general manager for Trust & Custody Services Bank'.
The dollar fell 0.5 percent against the yen from late US trade on Thursday to 106.80 yen, dropping further from a one-month high of 107.99 yen hit the previous day. "The weakness in the US housing sector is the root of concerns for bank problems and the economy there," said a trader at a Japanese trust bank.
"Though the weak data was not something new, it cooled sentiment for players who had bought the dollar in recent sessions," the trader said. Traders said the dollar was pressured on caution before more US data later in the day, including new home sales and durable goods orders for June.
The euro rose against the dollar, trimming some of the losses it made after data on Thursday showed that German corporate sentiment in July hit the lowest level since September 2005. The euro rose 0.2 percent to $1.5699 but fell 0.4 percent against the yen to 167.67 yen, retreating further from an all-time high of 169.97 yen hit earlier this week.
Some traders said the dollar came under pressure partly because of a report on a website called MFFAIS that said Singapore's Temasek Holdings liquidated 50 percent of its investment in Merrill Lynch. The New Zealand dollar fell after the Reserve Bank of New Zealand cut interest rates on Thursday, and other higher-yielding currencies extended falls on the view that US economic woes are spreading to other parts of the world.
"There are no major currencies attractive enough to draw aggressive buying now," said a trader at a major Japanese bank. The Australian dollar fell on concerns about the impact of the credit crisis on the nation's top lender.