Forex - Dollar mixed to lower as market mulls Fed tapering timing

The dollar traded mixed to lower against most major currencies on Monday as investors digested data and Federal Reserve comments while trying to predict when the Federal Reserve will begin to taper its monthly asset purchases.

In U.S. trading on Monday, EUR/USD was up 0.24% at 1.3738.

Profit taking eroded the dollar's support stemming from Friday's strong November jobs report.

The U.S. economy added 203,000 jobs in November, beating expectations for a 180,000 increase and up from a downwardly revised 200,000 rise the previous month.

In the private sector, 196,000 jobs were added last month compared to expectations for a 180,000 rise, after an increase of 214,000 in October.

The report also said the U.S. unemployment rate fell to 7.0% in November, from 7.3% in October, beating expectations for a downtick to 7.2%.

Also on Friday, the preliminary Thomson Reuters/University of Michigan consumer sentiment index increased to 82.5 in December from 75.1 the previous month, far surpassing expectations for a 76.0 reading.

The data kept expectations firmly in place that the Federal Reserve will begin scaling back its USD85 billion in monthly bond purchases in the coming months, which weaken the dollar to spur recovery.

Earlier Monday, Fed St. Louis President James Bullard said the chances of a Fed decision to taper asset purchases are growing now that the labor market has shown improvement.

“A small taper might recognize labor market improvement while still providing the Committee the opportunity to carefully monitor inflation during the first half of 2014,” Bullard said in prepared remarks of a speech he delivered earlier.

“Should inflation not return toward target, the Committee could pause tapering at subsequent meetings.”

Many investors expect tapering to begin early in 2014, though some have not ruled out the possibility of a start date beginning at the Fed's Dec. 17-18 policy meeting, the uncertainty of which allowed the dollar to weaken and stocks room to rise.

The greenback was down against the pound, with GBP/USD up 0.48% at 1.6426.

The dollar was up against the yen, with USD/JPY up 0.39% at 103.25, and down against the Swiss franc, with USD/CHF down 0.17% at 0.8904.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.04% at 1.0638, AUD/USD up 0.03% at 0.9106 and NZD/USD trading down 0.08% at 0.8277.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.15% at 80.14.