Forex
Dollar rises to six-month high after US data; weak yen prompts warning
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© Reuters. FILE PHOTO: U.S. Dollar and Chinese Yuan banknotes are seen in this illustration picture taken June 14, 2022. REUTERS/Florence Lo/Illustration/File Photo
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The dollar climbed to a six-month peak on Wednesday, reversing earlier losses, after U.S. data showed the services sector surprisingly picked up steam last month amid a rise in new orders and businesses paying higher prices, suggesting persistent inflation pressure.
The greenback recovered against most currencies after the data, with the euro and sterling hitting three-month lows and the yen touching session troughs. The U.S. currency, however, pulled back a bit in the afternoon as volume thinned.
The was last at 104.84, up 0.1%, after earlier hitting a fresh six-month high of 105.03.
The euro and sterling fell to three-month lows after the data and were last flat at $1.0726 and down 0.5% at $1.2505, respectively.
Data showed the Institute for Supply Management (ISM)’s non-manufacturing PMI rose to 54.5 last month, the highest since February and up from 52.7 in July. Economists polled by Reuters had forecast the non-manufacturing PMI would decrease to 52.5.
“It’s clear the U.S. economy remains much stronger by comparison than most of the rest of the G10 and runs substantially less risk of entering a recession,” said Helen Given, FX trader at Monex USA in Washington.
“With the UK and the eurozone teetering on the brink of true contraction, investors really have little choice but to place their faith in the U.S. (economy).”
The data suggested interest rates will remain elevated for longer, although it does not alter expectations that the Federal Reserve will pause its rate hikes at a meeting later this month.
For the November and December policy meetings, the chances of a rate hike increased to 48.4% and 46.6%, respectively, on Wednesday, according to the CME’s FedWatch. Those odds were at 45.2% for November and 43.5% for December late on Tuesday.
Fed officials the last two days, however, struck a dovish tone suggesting the U.S. central bank could pause again for the next several meetings to further assess the impact of monetary tightening on economic data.
Boston Fed President Susan Collins said Wednesday the central bank will proceed carefully when it comes to its next monetary policy steps.
Her comments followed similar remarks by Fed Governor Christopher Waller on Tuesday. Waller said in a CNBC interview that “there’s nothing that is saying we need to do anything imminent anytime soon, so we can just sit there, wait for the data, see if things continue” on their current trajectory.
Against the yen, the dollar trimmed losses, last down little changed at 147.69 yen. Earlier in the session, it rose to 147.82, the lowest since Nov. 4.
The currency market remains on yen-intervention watch, however.
The yen strengthened to as much as 147.02 per U.S. dollar after Japan’s top currency diplomat, Masato Kanda, said they will not rule out options if speculative moves persist, the strongest warning since mid-August.
Kanda, Japan’s vice-minister of finance for international affairs, has been the central figure in the country’s efforts to stem the sharp decline of the yen since last year.
Japan intervened in currency markets 12 months ago when the dollar rose past 145 yen, prompting the Ministry of Finance to buy the yen and push the pair back to around 140 yen. It intervened again in October last year when the currency pair hit 150 yen.
Also on Wednesday, the Fed released its so-called “Beige Book”, a snapshot of the U.S. economy. The report showed a moderation in economic growth in recent weeks, with inflation slowing in most parts of the country.
The dollar showed little reaction to the report.
========================================================
Currency bid prices at 3:56PM (1956 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 104.8300 104.7500 +0.09% 1.295% +105.0300 +104.5900
Euro/Dollar $1.0726 $1.0722 +0.04% +0.10% +$1.0749 +$1.0703
Dollar/Yen 147.6550 147.7000 -0.03% +12.62% +147.8150 +147.0200
Euro/Yen 158.38 158.39 -0.01% +12.88% +158.4600 +157.7800
Dollar/Swiss 0.8913 0.8897 +0.17% -3.61% +0.8944 +0.8882
Sterling/Dollar $1.2505 $1.2564 -0.45% +3.42% +$1.2587 +$1.2484
Dollar/Canadian 1.3640 1.3641 -0.01% +0.67% +1.3675 +1.3623
Aussie/Dollar $0.6379 $0.6379 +0.02% -6.41% +$0.6405 +$0.6359
Euro/Swiss 0.9561 0.9536 +0.26% -3.38% +0.9575 +0.9534
Euro/Sterling 0.8575 0.8533 +0.49% -3.04% +0.8577 +0.8529
NZ $0.5870 $0.5884 -0.23% -7.55% +$0.5903 +$0.5860
Dollar/Dollar
Dollar/Norway 10.7180 10.7080 +0.14% +9.26% +10.7510 +10.6780
Euro/Norway 11.4989 11.4909 +0.07% +9.58% +11.5236 +11.4648
Dollar/Sweden 11.1172 11.0921 +0.26% +6.82% +11.1408 +11.0597
Euro/Sweden 11.9253 11.8944 +0.26% +6.96% +11.9373 +11.8878
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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