Dollar holds gains ahead of housing, output data

LOS ANGELES (MarketWatch) — The U.S. dollar was largely steady against major rivals Friday, holding to a weekly gain ahead of the release of updates that may show slowing in the U.S. housing market and in industrial output.

The euro (EURUSD)  traded at $1.3615 compared with $1.3619 late Thursday in North America, while the yen also moved sideway, with dollar (USDJPY)  at ¥104.33, little changed from ¥104.29.

The British pound (GBPUSD)   declined modestly to $1.6343 from $1.6359 ahead of a retail-sales report from the Office for National Statistics for December that should provide insight on spending trends during the key holiday-shopping season.

Shutterstock.com Enlarge Image

The ICE dollar index (DXY)  , a gauge of the greenback's strength against six rivals, was at 80.930, up slightly from 80.904 late Thursday. The WSJ Dollar Index (XX:BUXX)  , an alternate measure of dollar strength, was at 74.32 from 74.29.

The ICE dollar index was track for a modest 0.4% gain since last Friday, with support coming in part after a better-than-expected rise in December U.S. retail sales. The Federal Reserve last month determined that the economy could withstand the beginning of stimulus withdrawal and decided to reduce its monthly debt purchases by $10 billion to $75 billion this month.

Bond purchases by the Fed have been seen as putting pressure on the value of the dollar.

Investors will look later Friday for the Commerce Department's report on December housing starts , due at 8:30 am Eastern time. Inclement weather conditions are already factored in by seasonal adjustment of the data, but investors will want to know if the cold weather had a stronger-than-usual impact on building activity. Construction on new homes is expected to reach a seasonally adjusted annual rate of 985,000, down from 1.09 million homes in November.

The unusually severe winter weather also probably curbed a rise in U.S. industrial production last month, limiting it to an increase of 0.2%, Capital Economics said in a Friday note.

"Normally, unusually cold winter weather boosts production, as the extra demand for heating leads to an increase in utilities output," said Capital Economics economist Paul Diggle. "But the weekly electricity-usage figures suggest that this may not have been the case, although it remains an upside risk."

Click to Play Stock bulls: You want the 49ers in the Super Bowl

Investors should hope the San Francisco 49ers make it to the Super Bowl. MarketWatch's Tom Bemis says this is not because he is based in the SF Bay, but because data shows the market tends to do well when the Niners win the NFC. (Photo: Getty Images)

Some economists said unusually poor weather likely hurt the U.S. labor market in December, during which the economy created only 74,000 jobs.

In other forex action, the Australian dollar (AUDUSD) was on par with Thursday's level around 88.15 U.S. cents. The Aussie on Thursday tumbled to a nearly 3 1/2-year low, rocked by speculation of an interest-rate cut by the Reserve Bank of Australia following a disappointing Australian jobs report for December.

If there's a further fall in growth in China — Australia's largest export market — and continued deterioration in Australian economic conditions over the coming months, "the RBA will likely be forced to cut rates to 2% or below," said Rivkin global analyst Tim Radford in a note Friday. "More accommodative policies will likely lend support to the broader Australian share market while dragging the Australian dollar to at least 85 [U.S.] cents."

More news from MarketWatch:

Citi goes bullish on miners for first time in three years.

Prices tell us markets look vulnerable.