Forex outlook: dollar likely to ally for sixth week

The dollar is expected to post its sixth straight weekly gain against the euro in the week ahead as concerns over how Greece will service its debt obligations remain front and center on the minds of investors. A move by China's central bank to raise commercial banks' reserves requirements for the second time this year is also likely to help the dollar as it chokes risk tolerance.
While the data calendar gets heavier as the week progresses with key inflation data scheduled for release, investors and analysts say it is unlikely to derail the overall themes of the week. "We'll see an extension of the current rally," said Kathy Lien, director of currency research at GFT in New York. "There are still problems with Greece and worries still linger."
The European Union on Thursday offered its support to help Athens rein in its fiscal deficits, but a lack of detail on its pledge is keeping investors cautious. Concerns that Greece may not be alone in struggling with its fiscal responsibilities has battered the euro in recent weeks. For the week, the euro fell 0.3 percent against the dollar, while the dollar rose 0.7 percent against the yen.
The euro has dropped 4.8 percent against the dollar this year and has declined for five straight weeks. China is the other big theme, with the surprise move by the People's Bank of China causing investors to worry about the global recovery. While investors had been expecting the PBOC to push the reserve requirement higher after an increase last month, few thought the second rise would come so soon.
Rising rates reduce demand for the loans necessary to finance economic expansion. In currency markets, rising Chinese rates will reduce risk tolerance and demand for high-yield currencies.
DATA GLUT A glut of US data releases will give investors much to ponder with the schedule of reports getting heavier as the week progresses. US markets will be closed on Monday for the Presidents Day Holiday.
Tuesday sees the release of Treasury International Capital flows (TICS) data for December. Wednesday has reports on January housing starts and building permits, import and export prices for January and industrial output for the same month. Later on Wednesday, investors and analysts will scrutinise the minutes of the January policy meeting of the Federal Reserve for more clues on the outlook for US interest rates.
Thursday's releases include weekly initial jobless claims and the January producer price index. The PPI is seen rising 0.8 percent in the headline number and 0.1 percent excluding food and energy. Friday's releases include the consumer price index for January with a 0.3 percent increase forecast for the headline number and 0.1 percent excluding food and energy.