D. Marie Currencies: Dollar marks strongest gain against euro in nearly a year
The dollar strengthened on Friday, posting its sharpest weekly advance in almost a year as expectations for an interest-rate hike by year’s end continued to increase.
It finished the week with a 1.9% gain against its European rival, its largest increase since the week ended Nov. 6.
Investors focused on hawkish comments from Fed officials on Friday despite a bevy of marginally discouraging economic data. A survey from the University of Michigan showed consumer sentiment fell to a 13-month low in October, while a reading on sales at U.S. retails in September was marginally weaker than economists had expected.
“Consumer sentiment wasn’t a great print. But will it fundamentally change the outlook for interest rates? No,” said John Doyle, director of markets at Tempus Inc.
Boston Fed President Eric Rosengren, one of three officials who voted to raise interest rates at the Fed’s September meeting, said the Fed may need to hike rates more aggressively than its latest forecasts currently suggest.
THE MORNING REPORT
Start your workday the right way with the news that matters most.
Your information is 100% secure with us and will never be shared Disclaimer & Privacy Policy
Fed Chairwoman Janet Yellen also spoke, but didn’t directly address the central bank’s looming monetary policy decisions.
The dollar also racked up strong weekly gains against the yen and the British pound, while losing ground against commodity-linked currencies like the Canadian dollar USDCAD, -0.4396% and Australian dollar AUDUSD, +0.4888% which benefited from rising oil prices. Crude-oil CLX6, -0.16% notched a 1.1% weekly gain to end at $50.35 an ounce on Friday, on growing hope of a cap on production.
The greenback USDJPY, +0.52% was changing hands at ¥104.18 late Friday in New York, up from ¥103.64 late Thursday in New York. The euro EURUSD, -0.7325% fell to $1.0981 late Friday, down 0.7% from $1.1006 late Thursday.
After rallying early in the session following Bank of England Gov. Mark Carney’s comment that the central bank isn’t “indifferent to the level of sterling,” the pound turned lower during the U.S. trading hours. The British currency GBPUSD, -0.6202% bought $1.2186 late Friday in New York, down 0.5% from $1.2241 late Thursday.
The British currency has lost about 6% of its value relative to the dollar over the past two weeks.
The ICE U.S. Dollar index DXY, +0.47% a measure of the dollar’s performance against a basket of six rival currencies, rose 0.5% to 97.9800.
In other data released Friday, retail sales rose 0.6% last month, snapping back from a slight decline in August. Economists polled by MarketWatch expected a 0.7% gain. The Producer Price Index, which measures the prices paid to U.S. producers for their goods, advanced 0.3% last month. The PPI is viewed as an early indicator of inflation, and the print suggests that consumer-prices will continue to rise in the coming months.
Though the headline number appeared strong, the details of the retail sales report—this week’s most-anticipated economic data release—were less so. A rise in car sales was largely responsible for the increase, while underlying sales remained soft, according to Capital Economics.
U.S. economic data released in recent weeks have strengthened the case for the Fed to raise interest rates before the end of the year, market strategists said.
Earlier in the week, minutes from the Fed’s September meeting showed that the central bank kept interest rates on hold despite a “reasonable argument” justifying a hike. Many officials expressed concerns about inflation, which has been slow to recover from a slump in oil prices.
Investors have also heard from a bevy of Fed officials this week, including New York Fed President William Dudley, who said the Fed could help foster long-lasting growth with “gentle” rate increases. On Thursday, Philadelphia Fed President Patrick Harker, who isn’t a voting member of the Fed’s rate-setting committee this year, said rates should rise “sooner rather than later,” and that rates could rise in December.
Chinese yuan holds near 6-year low
The U.S. dollar weakened slightly against the yuan on Friday, though the Chinese currency held near a six-year low after a batch of weak trade data helped drive a selloff in global stock markets.
Chinese officials guided the yuan lower earlier in the week after a spate of weak trade data out of China released earlier in the week rattled global stock markets. The data gave the People’s Bank of China another reason to allow the yuan to weaken further because it showed that China is vulnerable to a reduction in global trade, said Yue Zhong, a market analyst at FXTM.
The dollar USDCNY, +0.0669% traded at 6.7266 to the yuan at the close of onshore trading, compared with 6.7277 on Thursday.
Published at Fri, 14 Oct 2016 19:27:02 +0000
