LONDON, July 29 - The dollar erased earlier losses against the euro and yen on Tuesday as markets braced for U.S. consumer confidence data, the first in a series of U.S. indicators this week to offer clues about the recovery outlook. All the signs are pointing to an improvement in confidence as stock markets have rallied and the Federal Reserve has made encouraging noises about the prospects for economic recovery. But better than expected U.S. durable goods data failed to inspire the dollar on Friday, with investors still hesitant to commit themselves until they see manufacturing, gross domestic product and jobs data due later in the week. "Better sentiment from durable goods failed to materialise. The net result is that the market doesn't have appetite to push it either way," said Shahab Jalinoos, currency strategist at UBS Warburg. "Fairly big data is coming up this week and people want to see if a soft patch in global recovery is over." By 0945 GMT the dollar was steady at $1.1485 per euro , having fallen to $1.1535 earlier, near a three-week low set on Friday. Against the yen the greenback was steady, trading at 119.44 , just below a four-week high set on Monday.
DATA WEEK
For euro/dollar, analysts said the $1.1600-25 area was pivotal as to whether the single currency could muster enough momentum to retest the May/June highs above $1.19 or whether it would turn tail and head back towards the $1.11 area. "This is just a continuation of the bias we've seen over the past week with euro/dollar edging higher," said Ian Gunner, head of foreign exchange research at Mellon Financial Corporation. "The U.S. data this week and how the equity market reacts to it will have a bearing on whether the $1.16 area holds." Later in the week, the U.S. GDP report for the second quarter is due on Thursday and Friday has July's jobs report as well as the Institute for Supply Management's reading for manufacturing activity in July. "Perhaps around Thursday or Friday, we might be able to get some idea about where the market is headed," said Junya Tanase, global markets officer at J.P. Morgan Chase in Tokyo. The market is also expected to seek clues from the direction on equities and bonds. Tokyo stocks ended down slightly and European stocks were giving a mixed performance early in the European session. U.S. stocks were also pointing to a steady start on Wall Street later in the day after key indices ended down on Monday.
PRE-HOLIDAY EXPORTER PRESSURE
Tokyo traders said Japanese exporter sales had kept a lid on the dollar in Asian trade, with sell orders lined up between 119.60 and 120 yen. Exporters are rumoured to be looking for a chance to sell before the mid-August summer holidays. The dollar's downside was protected by market concerns about possible Bank of Japan intervention, leaving dollar/yen shuttling a range of less than half a yen. There was some encouraging news from Japan. Unemployment eased in June to 5.3 percent from 5.4 percent a month earlier, beating economists' forecast for 5.4 percent. But the data failed to fuel any movements in the foreign exchange market.