LONDON, July 18 - The dollar extended modest losses against the euro on Friday after a spate of upbeat U.S. economic data and weak corporate earnings releases pointed to mixed prospects for recovery in the United States. However, the dollar's weakness versus the euro failed to prop up the yen, which was broadly weaker ahead of a long holiday weekend in Japan and due to market weariness of the threat of Bank of Japan yen-selling.
More economic data from the U.S. is scheduled for release later on Friday, but analysts expect euro/dollar to remain mired in volatile but directionless trade with investors hungry for convincing evidence of future economic trends. "There is a lot of choppiness in the market today," said Ian Gunner, head of foreign exchange research at Mellon Bank in London. "U.S. data was strong but I am not sure if anything genuine has come out of it, while we had a host of announcements from software companies showing not so great revenues in the future," he said. By 0745 GMT, the dollar shed a quarter percent of its value from the previous session's close against the euro, trading at $1.1238 . However, chartists said the euro could gain a sustained hold over the dollar, which has been rising steadily against the single currency this month, only if it climbed above $1.1260.
The next potentially market moving data release is scheduled for 1345 GMT, when the University of Michigan releases its preliminary July consumer sentiment index. According to a survey, the index is seen reading 90.0, only a touch above June's final reading of 89.7. WEIGHING THE RECOVERY Meagre improvement seen in consumer confidence would tally with Thursday's weekly jobs data which showed unemployment benefit claims stuck at high levels, underscoring the lacklustre nature of recovery in the world's largest economy. Other data from the previous session did raise hopes for better growth, however, showing a vibrant housing market and a healthier mid-Atlantic manufacturing sector. But market sentiment was held back by discouraging news from tech bellwethers IBM and Nokia which showed disappointing results and dragged down U.S. stocks.
"People want to see more earnings because the economic picture is not clear," said Mellon's Gunner. However, despite weakness against the euro, the dollar was in demand in Asia. The dollar rose to around 119.19 yen, its highest level since July 2, before falling back to 118.96 yen . Against the euro, the yen was down a hefty half a percent at 133.60 . The greenback looked set to test 119.50 yen and above, with some analysts saying it had the legs to rise above 120 yen. "Last time it failed to stay above 120 yen for long, and many are still sceptical about being too bullish on the dollar," said Junya Tanase, global markets officer at J.P. Morgan Chase in Tokyo.//