Forex
US dollar gains but set for worst monthly loss in a year, euro falls
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© Reuters. FILE PHOTO: A New Zealand dollar coin sits atop a United States one dollar bill in this photo illustration taken on March 11, 2016. REUTERS/David Gray/Illustration/File Photo
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The dollar gained on Thursday as investors took profits on bets the currency would weaken further and shrugged off data showing signs the U.S. economy is slowing.
Thursday’s economic data suggested that the Federal Reserve is likely done raising interest rates and may start easing by the middle of next year, typically a dollar-negative factor.
Euro weakness after a soft euro zone inflation report also partly helped boost the greenback, analysts said.
The , which measures its value against six major currencies, rose 0.6% to 103.38 and was on track to post its best daily gain in more than a month. On a monthly basis, the dollar has posted a 3% loss, on pace for its worst monthly showing in a year.
Some analysts said the dollar may have benefited from month-end demand, as investors squared up positions for November, a period that featured a sharp sell-off in the U.S. currency with the market pricing in rate cuts next year.
Others, however, expected a dollar sell-off at month-end with stocks’ sharp gains for November. There were sell dollar signals at some of the biggest U.S. banks, analysts said.
“We were expecting dollar selling at month-end given how much U.S. equities rallied. That typically means foreign asset managers would have sold dollars forward,” said Vassili Serebriakov, FX strategist, at UBS in New York.
“But it’s possible that some of the selling happened earlier in the month. So maybe there’s less dollar selling at month end.”
Dollar gains persisted despite reports that showed U.S. inflation continued to moderate in October and jobless claims rose in the latest week suggesting a slowing labor market.
Inflation as measured by the personal consumption expenditures (PCE) price index was unchanged in October after climbing 0.4% in September. In the 12 months through October, the PCE price index increased 3.0%. That was the smallest year-on-year gain since March 2021 and followed a 3.4% advance in September.
Meanwhile, initial claims for state unemployment benefits increased 7,000 to a seasonally-adjusted 218,000 for the week ended Nov. 25. Economists had forecast 226,000 claims.
In other currencies, the euro fell after euro zone inflation eased by more than forecast this month, fuelling bets of early European Central Bank rate cuts.
Consumer price growth in the 20 countries that share the euro currency dropped to 2.4% in November from 2.9% in October, well below expectations for a fall to 2.7%.
The euro last changed hands at $1.0889 against the dollar, down 0.7%. It is still poised to show a monthly gain of 3%, the largest since November 2022.
Against the yen, the dollar rose 0.7% to 148.20 yen. For November, the greenback was down 2.3%, on pace for its largest monthly fall since December last year.
“The broader picture is that the dollar has weakened quite substantially in November. It’s still probably a two-way risk from here in terms of the Fed December meeting,” Serebriakov of UBS said.
“The U.S. data hasn’t slowed significantly. Inflation has but activity data remains relatively resilient,” he added.
U.S. rate futures have priced in about a 47% chance of a rate cut at the March 19-20, 2024 meeting, rising to about 78% probability at the April 30-May 1 meeting, the CME FedWatch Tool showed on Thursday. Overall, the rates market sees roughly 100 basis points (bps) of cuts by the end of 2024, according to LSEG data.
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Currency bid prices at 4:30PM (2130 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 103.4800 102.8200 +0.66% -0.010% +103.5900 +102.7100
Euro/Dollar $1.0887 $1.0969 -0.75% +1.61% +$1.0984 +$1.0879
Dollar/Yen 148.1800 147.2400 +0.64% +13.02% +148.5000 +146.8500
Euro/Yen 161.34 161.51 -0.11% +15.00% +161.9400 +160.6000
Dollar/Swiss 0.8753 0.8737 +0.19% -5.33% +0.8770 +0.8681
Sterling/Dollar $1.2625 $1.2695 -0.55% +4.40% +$1.2710 +$1.2604
Dollar/Canadian 1.3564 1.3589 -0.18% +0.11% +1.3626 +1.3553
Aussie/Dollar $0.6607 $0.6617 -0.14% -3.07% +$0.6650 +$0.6571
Euro/Swiss 0.9529 0.9585 -0.58% -3.70% +0.9590 +0.9474
Euro/Sterling 0.8621 0.8640 -0.22% -2.52% +0.8649 +0.8615
NZ $0.6155 $0.6156 +0.00% -3.05% +$0.6182 +$0.6123
Dollar/Dollar
Dollar/Norway 10.8050 10.6310 +1.84% +10.32% +10.8240 +10.6690
Euro/Norway 11.7625 11.6879 +0.64% +12.09% +11.7848 +11.6717
Dollar/Sweden 10.4919 10.3624 +0.59% +0.81% +10.5397 +10.3450
Euro/Sweden 11.4228 11.3560 +0.59% +2.45% +11.4840 +11.3576
Forex
Major Russian lenders say yuan coffers empty, urge central bank action
![](https://letizo.com/wp-content/uploads/2024/09/major-russian-lenders-say-yuan-coffers-empty-urge-centralbank-action_66dc6b1523127.jpeg)
By Elena Fabrichnaya
MOSCOW (Reuters) – Major Russian banks have called on the central bank to take action to counter a yuan liquidity deficit, which has led to the rouble tumbling to its lowest level since April against the Chinese currency and driven yuan swap rates into triple digits.
The rouble fell by almost 5% against the yuan on Sept. 4 on the Moscow Stock Exchange (MOEX) after the finance ministry’s plans for forex interventions implied that the central bank’s daily yuan sales would plunge in the coming month to the equivalent of $200 million.
The central bank had been selling $7.3 billion worth of yuan per day during the past month. The plunge coincided with oil giant Rosneft’s 15 billion yuan bond placement, which also sapped liquidity from the market.
“We cannot lend in yuan because we have nothing to cover our foreign currency positions with,” said Sberbank CEO German Gref, stressing that the central bank needed to participate more actively in the market.
The yuan has become the most traded foreign currency on MOEX after Western sanctions halted exchange trade in dollars and euros, with many banks developing yuan-denominated products for their clients.
Yuan liquidity is mainly provided by the central bank through daily sales and one-day yuan swaps, as well as through currency sales by exporting companies.
Chinese banks in Russia, meanwhile, are avoiding currency trading for fear of secondary Western sanctions.
At the start of September, banks raised a record 35 billion yuan from the central bank through its one-day swaps.
“I think the central bank can do something. They hopefully understand the need to increase the liquidity offer through swaps,” said Andrei Kostin, CEO of second-largest lender VTB, stressing that exporters should sell more yuan as well.
The acute yuan shortage also follows months of delays in payments for trade with Russia by Chinese banks, which have grown wary of dealing with Russia after U.S. threats of secondary Western sanctions. These problems culminated in August in billions of yuan being stuck in limbo.
Russia and China have been discussing a joint system for bilateral payments, but no breakthrough is in sight. VTB’s Kostin said that since Russia’s trade with China was balanced, establishing a clearing mechanism for payments in national currencies should not be a problem.
Forex
Bank of America sees more downside for the dollar
![](https://letizo.com/wp-content/uploads/2024/09/bank-of-america-sees-more-downside-for-the-dollar_66dc6b1b4bb7b.jpeg)
Investing,com – The US dollar has stabilized after a sharp fall in August, but Bank of America Securities sees more troubles ahead for the US currency.
At 07:20 ET (11:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.077, having largely held its course over the last week.
That said, the US currency is still down 1.6% over the month.
The dollar’s selloff last month stood out in a historical context, according to analysts at Bank of America Securities, in a note dated Sept. 5.
The greenback has since stabilized, however, despite the outsized weakness, the US bank still sees three reasons to stay bearish on the Dollar Index (DXY).
Following similar episodes of bearish DXY breakouts, the index has tended to continue its downtrend, the bank said.
In the last 3 analogs, DXY index fell on average for another 4% before reaching a bottom. Extending this analysis to bilateral USD/G10 pairs suggests a continuation of the USD downtrend is more likely vs EUR, GBP, and AUD than SEK, NOK, and CHF in G10.
While the DXY made a new year-to-date low in August, broad nominal and real USD trade-weighted indices have stayed at Q4 2022 levels and would suggest the USD remains overvalued.
The USD selloff in 2024 has been concentrated in and other European currencies, leading to DXY divergence from other USD indices.
The bank also noted US 10y Treasury yield’s tendency to fall after the first Federal Reserve cut, while global financial conditions are set to loosen further.
“USD may see more weakness as other central banks, particularly the ones that cut policy rates ahead of the Fed, can now afford to let the Fed do some of their work and indirectly support global economies outside of the US,” BoA added.
Forex
Dollar’s demise appears overstated – JPMorgan
![](https://letizo.com/wp-content/uploads/2024/09/dollars-demise-appears-overstated-jpmorgan_66dc6b208bdf2.jpeg)
Investing.com – The US dollar has had a difficult summer, dropping substantially during the month of August, but JPMorgan thinks those predicting the demise of the U.S. currency are getting ahead of themselves.
At 06:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.127, having lost 1.6% over the course of the last month.
“Diversification away from the dollar is a growing trend,” said analysts at JPMorgan, in a note dated Sept. 4, “but we find that the factors that support dollar dominance remain well-entrenched and structural in nature.”
The dollar’s role in global finance and its economic and financial stability implications are supported by deep and liquid capital markets, rule of law and predictable legal systems, commitment to a free-floating regime, and smooth functioning of the financial system for USD liquidity and institutional transparency, the bank added.
Additionally, the genuine confidence of the private sector in the dollar as a store of value seems uncontested, and the dollar remains the most widely used currency across a variety of metrics.
That said, “we are witnessing greater diversification and important shifts in cross-border transactions as a result of sanctions against Russia, China’s efforts to bolster usage of the RMB, and geoeconomic fragmentation,” JPMorgan said.
The more important and underappreciated risk, the bank added, is the increased focus on payments autonomy and the desire to develop alternative financial systems and payments mechanisms that do not rely on the US dollar.
“De-dollarization risks appear exaggerated, but cross-border flows are dramatically transforming within trading blocs and commodity markets, along with a rise in alternative financial architecture for global payments,” JPMorgan said.
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