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Dollar up after inflation data boost

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Dollar up after inflation data boost
© Reuters. FILE PHOTO: The employee of a currency exchange shop counts U.S. dollar banknotes in Ciudad Juarez, Mexico July 27, 2023. REUTERS/Jose Luis Gonzalez/File Photo

By Saqib Iqbal Ahmed

NEW YORK (Reuters) -The U.S. dollar touched a one-week high against a basket of currencies on Friday, extending its gains from the previous session when hot U.S. consumer prices data reinforced expectations that the Federal Reserve may have to keep interest rates higher for longer.

The consumer price index (CPI) rose 0.4% in September, keeping the annual rate at 3.7%, the same as in August, while economists polled by Reuters had forecast it would gain 0.3% on the month and 3.6% year-on-year.

Data on Wednesday had shown U.S. producer prices increased more than expected in September amid higher costs for energy products and food.

“Traders didn’t really believe in the hot PPI for September until CPI yesterday reinforced it,” Helen Given, FX Trader at Monex USA, said.

“I see yesterday’s big USD move as a correction to the under-reaction to PPI Wednesday,” Given said.

The , which measures the U.S. currency against six of its major peers, ticked up 0.11% to 106.63. The index, which jumped 0.8% on Thursday, its biggest one-day rise since March 15, is on pace to finish the week up 0.5%.

The dollar was also helped by safe-haven buying driven by the escalating Middle East conflict as Israel urged civilians to leave the northern Gaza Strip.

“Our sense is that the greenback’s renewed strength in large part also reflects growing economic and geopolitical uncertainty in the wake of the new war between Hamas and Israel,” Jonas Goltermann, deputy chief markets economist at Capital Economics, said in a note.

Commentary from Fed speakers is likely to keep the dollar supported.

Federal Reserve Bank of Philadelphia President Patrick Harker said Friday he believes the central bank is likely done with rate hikes amid an ongoing waning in price pressures, while flagging the uncertainty of how long rates will need to remain elevated.

Data on Friday showed U.S. consumer sentiment deteriorated in October, with households expecting higher inflation over the next year, but labor market strength was likely to continue supporting consumer spending.

Thursday’s boost to the greenback saw the yen head back toward the sensitive 150 level it briefly touched last week before strengthening sharply, which led some to believe authorities were intervening in the currency market.

The Japanese yen was last up 0.21% at 149.5 per dollar, with traders on guard for any signs of weakness.

“The risk of intervention is clearly high and that is constraining dollar-yen, which would otherwise be higher,” said Adam Cole, chief currency strategist at RBC.

Sweden’s crown edged up against both the dollar and euro after consumer price data came in higher-than-forecast, adding to risks that the Riksbank could raise rates further.

Investors also digested producer and consumer prices data out of China on Friday that showed deflationary pressures were slightly stronger than expected.

The offshore was flat at 7.3114 per dollar.

The Australian dollar, which often trades as a proxy for Chinese growth, was last down 0.23% at $0.6299.

The Canadian dollar edged higher against its U.S. counterpart on Friday as the price of oil, one of Canada’s major exports, moved sharply higher and investors raised bets on another Bank of Canada interest rate hike later this month. [CAD/]

Forex

Dollar steadies ahead of Powell’s speech; euro edges higher

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Investing.com – The U.S. dollar stabilized in early European trade Monday, handing back some of the gains seen after the attempted assassination of former U.S. President Donald Trump over the weekend, ahead of comments from Fed Chair Jerome Powell.

At 05:45 ET (09:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 103.785, after hitting a one-month low last week. 

Dollar stabilizes ahead of Powell speech

The dollar, and the benchmark , initially gained after Trump’s right ear was hit, leaving his face blooded, after shots rang out at a campaign rally in Pennsylvania over the weekend.

Trump is now set to appear at the 2024 Republican convention later this week, and is likely to be nominated as the party’s frontrunner for the presidential race.

Analysts said that the shooting increased his chances of a victory over Joe Biden- a scenario that could eventually favor the dollar, given that Trump has signaled his intent to enact more protectionist trade policies. 

However, these gains have dissipated ahead of comments from Federal Reserve Chair Jerome Powell, as he is set to be interviewed by David Rubenstein at the Economic Club of Washington DC.

U.S. inflation showed signs of easing last week, and Powell could advance expectations that the central bank will start a rate-cutting cycle in September.

“Fed speakers will have to comment on the latest CPI figures, and when compared to the June Dot Plot, there are clear risks of dovish readjustments in many FOMC members’ communication,” said analysts at ING, in a note.

Euro gains ahead of ECB meeting

rose 0.1% to 1.0910, with the euro trading at its highest level since March, ahead of the latest policy-setting European Central Bank meeting later this week.

The ECB is widely expected to maintain its current rates after they eased in June.

“The softer dollar story has boosted EUR/USD in July – but we still think the volatile situation in French politics is a risk that cannot be ignored, and point at least to the euro lagging most other pro-cyclical currencies in any new USD selloffs,” said ING.

Credit rating agencies Moody’s (NYSE:) and S&P Global have warned of negative impacts on the French economy from the political deadlock, where no political party won an outright majority at the recent parliamentary elections.

traded marginally lower to 1.2988, trading around the highest levels seen in over 2 years, in the wake of the landslide election victory for Britain’s center-left Labour government, with investors starting to look at U.K. markets as a potential haven as political uncertainty rises in the U.S. and elsewhere in Europe.

Yuan slipped after weak Chinese GDP data 

In Asia, traded 0.1% higher to 157.96, with the yen slipping slightly after it had firmed sharply against the dollar late last week, sparking speculation over whether the move was caused by government intervention or by a short squeeze on bets against the yen.

traded 0.2% higher to 7.2627, with the Chinese currency weakening close to eight-month lows after China’s economy grew less than expected at 4.7% in the second quarter, amid increasing headwinds from weak consumer spending. 

 

 

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Forex

Dollar strengthens after Trump shooting; Asia FX weakens

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Investing.com– Most Asian currencies moved little on Monday, while the dollar caught some safe haven bids after the attempted assassination of former U.S. President Donald Trump over the weekend. 

Regional trading volumes were muted on account of a Japanese market holiday. The yen weakened slightly against the dollar, keeping markets on edge over any potential government intervention.

Asian currencies had advanced sharply against the dollar last week amid increased optimism over interest rate cuts by the Federal Reserve. While the dollar retook some ground on Monday, it was nursing steep losses over the past two weeks. 

Weak gross domestic product data from China somewhat dented sentiment towards Asian markets, while the yuan also weakened after the reading. 

Dollar firms as Trump assassination attempt favors safe havens 

The and both rose 0.1% in Asian trade, recovering from an over one-month low hit last week. 

The greenback caught some bids after a shooting at a Trump rally in Pennsylvania, where the former President shot in the ear. But Trump was seen urging his supporters to “fight!” after the shooting.

Trump is now set to appear at the 2024 Republican convention later this week, and is likely to be nominated as the party’s frontrunner for the presidential race.

Analysts said that the shooting increased his chances of a victory over Joe Biden- a scenario that could eventually favor the dollar, given that Trump has signaled his intent to enact more protectionist trade policies. 

The dollar is also set to take more cues from an address by later this week.

Japanese yen flat, intervention in focus 

The Japanese yen steadied in thin trade on Monday, with the pair hovering around the 158 yen level.

The yen had firmed sharply against the dollar late last week, sparking speculation over whether the move was caused by government intervention or by a short squeeze on bets against the yen. The yen also recovered from its weakest level in 38 years.

But despite a recent recovery, the yen was still nursing steep losses against the dollar over the past two years.

Chinese yuan slips on weak Q2 GDP 

The Chinese yuan weakened on Monday, with the pair falling 0.2% and coming close to eight-month highs.

China’s economy grew less than expected at 4.7% in the second quarter, data showed, amid increasing headwinds from weak consumer spending. 

The reading ramped up concerns over a slowing economic recovery in the country, especially as it grapples with slowing consumer spending. 

Broader Asian currencies mostly weakened on Monday. The Australian dollar’s pair fell 0.1%, while the South Korean won’s pair rose 0.7%.

The Singapore dollar’s pair rose 0.1%, while the Indian rupee’s pair remained close to record highs. 

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Forex

Dollar hovers around 1-mth low as soft CPI data spurs rate cut bets

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Investing.com– The dollar steadied against a basket of currencies on Friday after softer-than-expected inflation data saw the greenback sink to one-month lows, amid increased bets that the Federal Reserve will cut interest rates in September.

Broader foreign exchange markets were somewhat cautious amid volatility in the Japanese yen. The Japanese currency strengthened sharply on late-Thursday, which sparked speculation over whether the Japanese government had intervened in currency markets.

The euro moved little against the dollar German inflation data read slightly weaker than expected for June. The pair steadied after surging to an over one-month high against the dollar on Thursday.

The British pound was also flat, with the pair moving little after rallying to a near one-year high against the dollar on Thursday. The pound was also buoyed by data on Thursday which showed the British in May.

Dollar near 1-mth low as soft CPI spurs rate cut bets 

The and steadied on Friday after tumbling to a one-month low in overnight trade.

The greenback was battered by softer-than-expected data, which showed inflation cooled a smidge more than expected in June. 

The reading ramped up bets that the Federal Reserve will have more confidence to begin cutting interest rates.

Traders were seen pricing in a 83.4% chance the Fed will cut rates in September, compared to a 64.7% chance seen last week, according to .

Japanese yen volatile after USDJPY tumbles from 161; intervention in focus 

The Japanese yen was volatile in Friday trade, with the pair rising 0.2% to about 159.18 yen.

The pair slid over 2% on Thursday after the soft U.S. CPI report, dropping from levels close to a 38-year high, which it had hit earlier in July.

But the sharp drop in the yen sparked questions over whether the Japanese government was actively intervening in currency markets. Officials gave scant cues on the matter, even after offering a string of warnings in recent weeks over betting aggressively against the yen.

Data on the Bank of Japan’s balance sheet, due later in July, is expected to offer more clarity on whether the government did intervene. Traders also speculated whether short positions on the yen were squeezed by a sharp decline in the dollar, following the weak CPI reading for June. 

 

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