Dollar extends decline after pending home sales

NEW YORK (MarketWatch) — The dollar extended losses against major rivals on Monday after a report on U.S. home sales.

Pending home sales rose for the first time in six months in November, with a key gauge rising 0.2% to 101.7, according to the National Association of Realtors. A Bloomberg News poll showed expectations for a 1% gain from the previous month, compared to a 0.6% drop in October.

The ICE dollar index (DXY) , which compares the U.S. unit to a basket of six other currencies, dropped to 80.052 from 80.369 late Friday, while the WSJ Dollar Index (XX:BUXX) slipped to 73.71 from 73.94.

AFP/Getty Images Enlarge Image

The dollar on Friday had fallen sharply against the euro, which hit its highest level in more than two years intraday, before rebounding later in the day. No major U.S. data came out Friday, and several currency analysts said the volatile action was exaggerated by thin trading volumes.

The Federal Reserve is set to reduce its monthly asset purchases to $75 billion in January from $85 billion, which represents a step back in its unprecedented monetary stimulus. At the same time, other central banks, including the Bank of Japan, could be gearing up for more stimulus. The dollar has surged 21% against the yen in 2013.

The dollar (USDJPY)  stuck near late Friday's levels, trading at ¥105.09 versus ¥105.15.

The euro (EURUSD)  rose to $1.3802 from late Friday's $1.3742, while the Australian dollar (AUDUSD) gained to 89.01 U.S. cents from 88.70 U.S. cents.

Click to Play Positive global survey bodes well for economy

Data from advanced economies continue to show positive momentum, on balance–as seen in business survey results. All things being equal, that should be positive for markets around the world. Photo: Getty Images.

The British pound (GBPUSD)  rose to $1.6507 from late Friday's $1.6469.

While sterling traded below Friday's intraday high of $1.6578, a 28-month high, ICICI Bank analysts said the currency remained supported by recent economic strength. "Although there were no major data releases last week, the confidence in the U.K.'s economic recovery is boosted by strong revival in the housing market and the falling unemployment rate," they wrote Monday.

"With the improving economy, bets on monetary tightening are increasing, which led to a fall in gilts, as the 10-year yield rose above 3% for the first time since September," they wrote.

More MarketWatch news:

Record run for stocks has investors nervous about 2014

Mile wide, inch deep: Bond-market liquidity dries up

10 things not to buy in 2014