April 16, 2018 / 6:50 PM / 8 months ago

FOREX-Dollar falls on reduced fears over protracted strike on Syria

    * Investors brush off U.S. retail sales rebound in March 
    * Traders hope for no prolonged Western military strike against Syria 
    * Sterling climbs to highest level since January
    * U.S. Treasury currency report brings no surprises for markets

 (Updates market action, adds analyst note)
    By Richard Leong
    NEW YORK, April 16 (Reuters) - The dollar fell broadly on Monday on hopes that a
U.S.-led strike on Syria would not lead to escalation, rekindling some appetite for stocks
and other risky assets and spurring investors to reduce safe-haven holdings of the
greenback.
    Government data that showed a rebound in U.S. store sales in March failed to lift the
dollar, which has been pressured by concerns over a trade war between the United States and
China, the world's two biggest economies.
    "The action may be more limited than previously thought and that's helped market
sentiment," Eric Viloria, currency strategist at Wells Fargo Securities in Stamford,
Connecticut, said of a weekend missile strike against Syria.
    The United States, Britain and France said their bombing was aimed at three chemical
weapons facilities in retaliation for a suspected poison gas attack in Douma by the Assad
regime.
    For now, the three Western nations signaled there will be no further strikes.
    The MSCI world equity index, which tracks shares in 45 nations, rose
0.51 percent, to 513.12.
    An index that tracks the dollar against a basket of six currencies fell 0.39
percent, to 89.452. The dollar index hit a two-week low of 89.355 last week.       
    Despite widening interest rate differentials in its favor and the widest yield gap
between two-year U.S. and German debt in nearly three decades, the
dollar's performance in recent months has been closely correlated to swings in risk
appetite.
    That is because although the U.S. central bank has kept on track in raising interest
rates, broader financial conditions remained loose.
    "In any case, we continue to expect healthy economic growth and positive returns for
risky assets, so the dollar’s flight-to-quality attributes should not be a central driver
for the time being," Goldman Sachs strategists Zach Pandl and Lorenzo Incoronato wrote in a
research note.
    In a wider measure of dollar positioning that includes net contracts on
the New Zealand dollar, Mexican peso, Brazilian real and Russian ruble, the greenback
posted its biggest net short position since August 2011.
    The U.S. Treasury semi-annual report released late on Friday did not jolt the currency
markets, with the Trump administration again refraining from naming any major trading
partners as currency manipulators as it pursues potential tariffs and negotiations to try
to cut a massive trade deficit with China.                
    Sterling was an exception. It gained 0.6 percent, rising above $1.43 for the
first time since January as investors focused on data that could help shore up expectations
of a May interest rate hike.
========================================================
    Currency bid prices at 1432 EDT (1832 GMT):
 Description      RIC        Last      U.S. Close  Pct      YTD Pct   High Bid   Low Bid
                                        Previous   Change    Change              
                                        Session                                  
 Euro/Dollar                 $1.2377   $1.2329     +0.39    +3.18     +1.2394    +1.2325
 Dollar/Yen                  107.0500  107.3300    -0.26    -4.99     +107.6100  +107.0400
 Euro/Yen                    132.52    132.34      +0.14    -1.97     +132.9600  +132.1200
 Dollar/Swiss                0.9597    0.9622      -0.26    -1.50     +0.9637    +0.9579
 Sterling/Dollar             1.4324    1.4239      +0.60    +6.01     +1.4337    +1.4228
 Dollar/Canadian             1.2571    1.2610      -0.31    -0.05     +1.2623    +1.2567
 Australian/Doll             0.7779    0.7766      +0.17    -0.28     +0.7783    +0.7753
 ar                                                                              
 Euro/Swiss                  1.1880    1.1862      +0.15    +1.63     +1.1884    +1.1861
 Euro/Sterling               0.8641    0.8659      -0.21    -2.72     +0.8669    +0.8627
 NZ Dollar/Dolar             0.7360    0.7357      +0.04    +3.87     +0.7371    +0.7334
 Dollar/Norway               7.7767    7.7724      +0.06    -5.24     +7.7931    +7.7486
 Euro/Norway                 9.6249    9.5904      +0.36    -2.27     +9.6356    +9.5814
 Dollar/Sweden               8.4143    8.4722      -0.28    +2.59     +8.4866    +8.3970
 Euro/Sweden                 10.4166   10.4457     -0.28    +5.87     +10.4699   +10.3970
    

    
 (Additional reporting by Saikat Chatterjee in LONDON,
Shinichi Saoshiro in TOKYO;
Editing by Susan Thomas and Dan Grebler)
  
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