23.07.201304:54:50UTC+00Dollar retreat as fed stimulus prospects weigh

The U.S. dollar pulled back versus its key rivals Tuesday as investors weighed the prospects for a continuation of financial stimulus from the Federal Reserve.

The ICE dollar index, which measures the greenback versus six other major currencies, backed down to 82.150, down from 82.235 late Monday in North American trade, wading at levels not seen in a month.

The dollar was on course for its third straight daily loss versus the Japanese yen, purchasing ¥99.55 compared with late Monday’s ¥99.60.

The euro move ahead to $1.3196 from $1.3185, and touched an intraday high of $1.3207, according to FactSet data. The euro hasn't exchanged above the $1.32 since June 19.

As the Fed tracks the housing market as part of its assessment on when to slow the pace of its stimulus efforts, the National Association of Realtors on Monday said June home sales fell 1.2% to an annual rate of 5.08 million, from a downwardly revised 5.14 million. Economists polled by MarketWatch had expected a 5.28 million rate after the NAR initially reported 5.18 million in May.

The report raised concerns that a current surge in mortgage rates will hurt overall housing sales.

While the 5.08 million figure is the second-highest rate since November 2009, the weaker-than-expected home-sales report came after Federal Reserve Chairman Ben Bernanke last week said it was too early to determine whether the central bank will taper asset purchases at its meeting in September.

The central bank currently purchases $85 billion a month in government and U.S. mortgage debt.

Monetary stimulus has been seen as putting pressure on the dollar’s value, and the latest suggestion by Bernanke that it may last longer than anticipated has hurt the dollar in recent sessions.

Meanwhile, an election victory over the weekend by Japan’s Liberal Democratic Party “did not deliver the sharp move higher in [the dollar-yen rate] that many were looking for,” Crédit Agricole head of Asia global markets research Mitul Kotecha wrote to clients.

The largely expected election result may explain the lack of follow-through for the dollar-yen rate, said Kotecha, “but it may also be due to the drop in U.S. yields over recent days in light of the Fed’s success in calming bond market fears for now.”

The market in the near term will look for Japanese Prime Minister Shinzo Abe to make concrete announcements about his reform plans, but until then, the dollar “may struggle to sustain a move above 100 [yen],” Kotecha said.

Among other major currency pairs, the British pound is on track for a sixth consecutive day of gains against the greenback, exchanging at $1.5369 against $1.5352. The Australian dollar purchased 92.67 U.S. cents, higher than 92.42 U.S. cents on Monday.