Dollar gains after three-day fall as risk rally takes a breather

* Dollar pares gains after upbeat U.S. data
* Aussie and Kiwi dollar fall
* Dollar gains vs yen after dour Japanese data
* Traders eye Fed policy meeting next week
* Graphic: World FX rates

(Adds new comment, Fed meeting next week, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 22 (Reuters) - The dollar drifted higher on Friday after three straight days of losses,
and riskier currencies fell, as bleak non-U.S. economic data gave global equity markets reason to pause
after another week of record highs.
As a safe haven, the U.S. currency tends to rise in times of financial and economic stress that
results in lower risk appetite.
The S&P 500 and the Dow along with U.S. Treasury yields were lower as well, suggesting a
generally somber mood in financial markets.
The dollar did pare gains and riskier currencies cut losses earlier after upbeat U.S. economic data -
a rise in factory activity to its highest in more than 13 years in January and an unexpected 0.7% gain in
existing home sales.
The greenback had fallen against a basket of currencies for the past three sessions as market optimism
about new U.S. President Joe Biden's fiscal stimulus plans prompted traders to seek riskier assets,
producing gains in currencies such as the New Zealand and Australian dollar.
But that trend paused on Friday, as market sentiment pulled back. Global shares slipped off record
highs as the U.S. dollar steadied, up 0.1% on the day at 90.209.
The dollar index though still posted its biggest weekly loss since mid-December.
"There is some indecision in the marketplace and risk sentiment has been soured a little bit," said
Amo Sahota, executive director at currency advisory firm Klarity FX in San Francisco.
"The market has probably one eye on the Fed meeting next week, where they will likely throw a little
bit more caution in the marketplace given the slower vaccine rollout and prolonged virus uplift globally."
U.S coronavirus deaths have now reached nearly 410,000, with close to 25 million cases.
The Federal Reserve next week will hold its first monetary policy meeting of the year and strategists
expect the Fed to stay dovish, and officials "will probably note signs of slowing in the economy since the
December meeting," NatWest Markets said in a research note.
Gloomy economic data also did little to brighten the mood, as UK data showed British retailers
struggled to recover in December.
Economic activity in the euro zone shrank markedly in January as stringent lockdowns to contain the
coronavirus pandemic hit the bloc's dominant service industry hard.
In afternoon trading, the dollar rose 0.3% against the yen to 103.815.
Data from Japan overnight showed factory activity slipped into contraction in January and the services
sector was more pessimistic as emergency measures to combat a COVID-19 resurgence dampened sentiment.

The Australian dollar fell after disappointing retail sales data, but still posted weekly gains. It
was last down 0.6% at US$0.7718.
The New Zealand dollar was down around 0.6% at US$0.7179 versus the U.S. dollar.
The euro was little changed at $1.2167.
The single currency rose on Thursday after the European Central Bank's policy rate announcement, with
the ECB saying it might not need to use its full asset-purchase envelope.
The Norwegian crown, meanwhile, was hurt by lower commodity prices, slumping 1.1% against the dollar
to 8.4940.

Currency bid prices at 3:10PM (2010 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Dollar index 90.2360 90.1080 +0.15% +0.00% +90.3070 +90.0390
Euro/Dollar $1.2167 $1.2169 -0.02% -0.42% +$1.2190 +$1.2152
Dollar/Yen 103.8300 103.5100 +0.28% +0.50% +103.8800 +103.5100
Euro/Yen 126.32 125.91 +0.33% -0.47% +126.3900 +125.9000
Dollar/Swiss 0.8858 0.8851 +0.11% +0.16% +0.8866 +0.8840
Sterling/Dollar $1.3676 $1.3736 -0.43% +0.11% +$1.3735 +$1.3636
Dollar/Canadian 1.2727 1.2638 +0.70% -0.06% +1.2739 +1.2635
Aussie/Dollar $0.7713 $0.7765 -0.66% +0.27% +$0.7769 +$0.7702
Euro/Swiss 1.0778 1.0767 +0.10% -0.29% +1.0784 +1.0764
Euro/Sterling 0.8894 0.8857 +0.42% -0.48% +0.8918 +0.8858
NZ $0.7177 $0.7220 -0.54% +0.00% +$0.7224 +$0.7167
Dollar/Norway 8.4930 8.4050 +1.13% -1.01% +8.5050 +8.4130
Euro/Norway 10.3350 10.2280 +1.05% -1.26% +10.3510 +10.2280
Dollar/Sweden 8.2955 8.2691 +0.31% +1.21% +8.3020 +8.2643
Euro/Sweden 10.0939 10.0624 +0.31% +0.17% +10.0985 +10.0617

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Mark Heinrich and Andrea Ricci)

First Published: 2021-01-22 03:45:24
Updated 2021-01-22 22:38:44

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