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Dollar bounces as US retail sales beat expectations

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Dollar bounces as US retail sales beat expectations
© Reuters. U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File photo

By Karen Brettell and Samuel Indyk

NEW YORK/LONDON (Reuters) – The dollar gained on Tuesday after data showed that U.S. retail sales rose more than expected in September, with investors also focused on a busy week of speeches by Federal Reserve officials.

Retail sales rose 0.7% last month as households boosted purchases of motor vehicles and spent more at restaurants and bars.

“The whole idea of the U.S. economy slowing down in Q4 was that the consumer would pull back, and they ended Q3 on a very strong note,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

That said, “we haven’t seen as big of a rally in the dollar as one might have expected on such a strong retail sales number,” he added.

The was last up 0.16% at 106.40. It is holding below the 107.34 level reached on Oct. 3, the highest since November 2022.

The euro fell 0.11% to $1.0548. It is up from $1.0448 on Oct. 3, the lowest since December 2022.

Investors are focused on speeches this week by Fed officials, including Fed Chair Jerome Powell on Thursday, for further clues about interest rate policy.

The officials will enter a blackout period on Oct. 21 before the Fed’s Oct. 31 – Nov. 1 meeting.

Traders are evaluating whether the U.S. central bank may hike rates again as it battles to bring inflation closer to its 2% annual target.

Fed funds futures traders are pricing in a 43% chance of an additional interest rate hike this year, but only 12% odds of a rate increase next month, according to the CME Group’s (NASDAQ:) FedWatch Tool.

The yen briefly surged but quickly trimmed gains after a media report that the Bank of Japan was considering raising its core CPI forecast for the 2023 and 2024 fiscal years but maintaining the inflation outlook for 2025.

The yen was last 149.77 per dollar, having strengthened to 148.75 after the report, as analysts said the knee-jerk reaction to higher inflation forecasts in the near term was negated by the longer-term projections.

“Central banks are not trying to hit the CPI targets in the near term,” said Colin Asher, senior economist at Mizuho.

“For my part, I see a decent risk that the BoJ is underestimating the risks of the CPI remaining elevated into FY25, which is one reason why I expect that the BoJ will be forced to tighten policy in the New Year,” Asher added.

Investors were also on edge for any signs of intervention by the Japanese authorities as the yen traded close to the 150 level that prompted officials to step in to buy the currency in 2022.

Japan’s top financial diplomat Masato Kanda said on Monday the yen was still perceived as a safe-haven asset like the dollar and the Swiss franc despite its recent weakness, and was benefiting from demand due to the conflict in the Middle East.

LOONIE, POUND DIP AS DATA DAMPENS HIKE EXPECTATIONS

The Canadian dollar weakened after Canada’s annual inflation rate unexpectedly slowed to 3.8% in September and underlying core measures also eased, prompting markets and analysts to trim bets for another interest rate hike next week.

The U.S. dollar was last up 0.40% at 1.366 Canadian dollars.

The pound dipped after growth in British workers’ regular pay slowed from a previous record high and job vacancies also dropped, although the publication of some labour market data, including the unemployment rate, was delayed until next week.

Sterling was last at $1.2147, down 0.56% on the day, after jumping 0.6% on Monday.

The New Zealand dollar fell 0.79% to $0.5882 after data on Tuesday showed consumer inflation hit a two-year low, reducing expectations the central bank will hike the cash rate further in November.

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Currency bid prices at 10:00AM (1400 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 106.4000 106.2600 +0.16% 2.812% +106.5200 +106.1000

Euro/Dollar $1.0548 $1.0561 -0.11% -1.55% +$1.0579 +$1.0533

Dollar/Yen 149.7700 149.5150 +0.18% +14.24% +149.7900 +148.7500

Euro/Yen 157.98 157.87 +0.07% +12.60% +158.1000 +157.2500

Dollar/Swiss 0.9022 0.9003 +0.21% -2.44% +0.9032 +0.8997

Sterling/Dollar $1.2147 $1.2217 -0.56% +0.45% +$1.2217 +$1.2134

Dollar/Canadian 1.3666 1.3612 +0.40% +0.86% +1.3703 +1.3606

Aussie/Dollar $0.6344 $0.6343 +0.03% -6.92% +$0.6367 +$0.6335

Euro/Swiss 0.9514 0.9504 +0.11% -3.85% +0.9519 +0.9499

Euro/Sterling 0.8681 0.8644 +0.43% -1.84% +0.8690 +0.8642

NZ $0.5882 $0.5929 -0.79% -7.36% +$0.5927 +$0.5872

Dollar/Dollar

Dollar/Norway 10.9830 10.9320 +0.57% +12.02% +11.0100 +10.9330

Euro/Norway 11.5921 11.5277 +0.56% +10.47% +11.6149 +11.5250

Dollar/Sweden 10.9494 10.9181 +0.27% +5.20% +10.9670 +10.8950

Euro/Sweden 11.5534 11.5228 +0.27% +3.62% +11.5580 +11.5170

Forex

Dollar slips ahead of GDP data; euro rises and yen surges

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Investing.com – The U.S. dollar slipped lower Thursday, the euro posted small gains while the Japanese yen climbed to multi-month highs ahead of next week’s Bank of Japan meeting.  

At 05:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, fell 0.2% to 103.950, extending an overnight decline.

Dollar slips ahead of GDP data

The dollar retreated Thursday, extending an overnight decline amid increasing confidence that the will cut interest rates in September.

data for the second quarter are due later in the session, and is expected to show annualized growth of 2.0%.

This would be above the 1.4% growth seen in the first quarter, but would remain considerably slower than the 4.2% pace seen in the second half of last year.

The release will also show inflation slowed considerably last quarter, with the GDP price index falling to 2.6% from 3.1%, ahead of Friday’s price index data, the Federal Reserve’s favored gauge of inflation.

The Fed is set to meet next week, and is widely to keep interest rates steady while signaling a rate cut in September. 

German business morale falls again

In Europe, rose 0.1% to 1.0847, with the euro edging higher despite German business morale unexpectedly falling in July, the third consecutive decline in Germany’s most prominent leading indicator..

The Ifo institute said its sank to 87.0 in July from 88.6 in June.

“The German economy is stuck in the crisis,” said Ifo president Clemens Fuest.

The kept interest rates on hold at 3.75% last week, but markets are pricing in just short of two more ECB rate cuts for the rest of this year.

traded 0.2% lower at 1.2885, falling back from the 1.30 level ahead of next week’s Bank of England policy-setting meeting.

UBS expects the central bank to trim interest rates in what is widely seen as a close call as to when it will start what is likely to be a slow and steady reduction path.

Yen goes from strength to strength 

In Asia, fell 0.7% to 152.72, with the pair falling to its weakest level in 2-1/2 months as traders abandoned short yen bets in the run up to the BOJ’s July meeting in the wake of suspected currency market intervention by the Japanese government.

The is expected to consider a 10 basis point hike, and could unveil a plan to roughly halve bond purchases in coming years.

“USD/JPY has now corrected 6% off its high. This has proved another successful intervention campaign for Japanese authorities,” said analysts at ING, in a note. 

“We think the success of the intervention has had less to do with the size of the FX sales and more to do with the timing. As was the case in September/October 2022, Japanese FX intervention has been timed to coincide with a dovish reappraisal of Fed policy. Very clever.”

slipped 0.5% lower to 7.2281, but remained near an eight-month high amid persistent concerns over a slowing economic recovery in the country. Surprise rate cuts by the People’s Bank added to pressure on the currency and did little to lift spirits over the Chinese economy.

 

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Forex

Investors turn long on Singapore dollar after 7 months; bearish bets on Asian FX ease – Reuters poll

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By Roushni Nair

(Reuters) –

Investors turned bullish on the Singapore dollar for the first time since mid-December as the city-state’s growth and inflation dynamics continue to support the local unit, while bearish bets on most Asian currencies eased, a Reuters poll found on Thursday.

Long positions on the Singapore dollar were at their highest since early April 2023, while bearish bets on the Malaysian ringgit fell to levels seen in April last year, according to a fortnightly poll of 10 analysts.

The Monetary Authority of Singapore (MAS) does not seem to be in a hurry to ease policy settings after a core inflation reading of above 3% in May with growth in the second quarter coming in strong at 2.9%, according to analysts.

MAS will conclude its policy meeting on Friday, with analysts expecting the central bank to maintain its hawkish stance and hold on to its current policy settings even as inflation in June was at a two-year low.

“The strong data (growth and inflation) and the continued appreciation of the SNEER (Singapore dollar nominal effective exchange rate) make us continue to like the SGD on a relative-value basis and against low-yielders in the region,” analysts at Bank of America said in a note.

However, any spike in oil prices due to geopolitical events would exert upside pressure on Singapore dollar’s safe-haven status, they added.

Singapore is among the few countries in the world with a triple-A sovereign credit rating that is reflective of exceptionally strong fiscal and external balance sheets, factors that firm its position as a safe harbor for investors.

Meanwhile, markets have priced in a 100% chance of an interest rate cut by the U.S. Federal Reserve as early as September, with investors awaiting a slew of macroeconomic data, including second-quarter growth figures, to further validate their bets. [FEDWATCH]

Declining interest rates in the U.S. would take the shine off the dollar as it could lead to lower foreign investments while triggering a risk-on sentiment for emerging Asian currencies.

This has resulted in short bets on the Philippine peso and Thailand’s baht also easing significantly.

Bearish positions on the Chinese yuan and the Taiwanese dollar were at their highest since June 27.

Markets in Taiwan extended losses, pressured by statements from Washington last week that hinted at the possibility of tougher curbs for exports of advanced semiconductor technology to China.

Taiwan markets were closed for a second successive day because of bad weather.

The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long U.S. dollars.

The figures include positions held through non-deliverable forwards (NDFs).

The survey findings are provided below (positions in U.S. dollar versus each currency):

DATE USD/SG USD/ID USD/IN USD/TH

D R R B

25-Jul-24 1.07 0.79 -0.33 0.35 0.86 0.12 0.39 0.43 0.02

11-Jul-24 1.05 0.87 0.06 0.73 0.68 0.22 1.03 0.86 0.51

27-Jun-24 1.34 1.28 0.80 1.49 0.88 0.46 1.00 1.37 0.91

13-Jun-24 0.95 0.87 0.62 1.22 0.64 0.37 1.00 1.23 0.92

30-May-24 1.05 0.72 0.33 0.94 0.53 0.00 0.81 1.19 1.00

16-May-24 1.05 0.96 0.35 0.96 1.02 0.39 1.23 1.29 1.00

2-May-24 1.25 1.61 0.89 1.39 1.40 0.49 1.46 1.44 1.39

18-Apr-24 1.25 1.59 0.80 1.32 1.24 0.43 1.42 1.19 1.28

© Reuters. FILE PHOTO: A Singapore dollar note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File photo

4-Apr-24 1.18 1.09 0.42 1.13 1.17 0.00 1.15 0.62 1.35

21-Mar-24 0.92 0.82 0.33 0.60 0.92 -0.54 1.12 0.47 1.13

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Forex

US dollar pares losses after economic data

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NEW YORK (Reuters) – The U.S. dollar trimmed losses on Thursday after data showed the the world’s largest economy expanded faster than expected and inflation slowed in the second quarter.

© Reuters. FILE PHOTO: U.S. Dollar banknote is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The greenback came off lows against the surging yen and was last down 0.4% at 153.16. It was at 152.68 yen before the data. The was slightly down at 104.32 after the data. It was at 104.21 just before.

Advance estimates showed that gross domestic product grew at a 2.8% annualized rate last quarter. Economists polled by Reuters had forecast GDP rising at a 2.0% rate.

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