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| The US dollar is declining.. Will the decline continue? |
The US dollar is declining.. Will the decline continue?
The US dollar, after rising yesterday on inflation expectations, turned lower in weak, holiday-impacted trading on Thursday, as traders digested the latest economic data and what it means for the Federal Reserve's interest rate policy.
At 18:18 Saudi time, the dollar index, which measures the US currency against a basket of six other currencies, fell 0.15% to 103.68, just above the two-and-a-half-month low of 103.17 seen earlier this week.
The dollar is moving lower with small trading volumes
The dollar received a slight boost on Wednesday after weekly unemployment claims data showed that the number of Americans filing new claims fell more than expected last week, indicating that the labor market remains healthy.
In addition, University of Michigan inflation expectations were revised higher, but this was countered by data showing orders for long-term US manufactured goods fell more than expected in October.
While this positive tone did not last for long, though, trading volumes are limited with both Japan and the United States on holiday, with the latter celebrating Thanksgiving.
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Part of the dollar recovery observed over the past two sessions... may be related to some profit-taking in risk-on trades and more defensive positions ahead of Thanksgiving,” analysts at ING said in a note.
The index has fallen about 2.5% so far in November and is on track for its worst monthly performance in a year, with the market fully expecting the Fed to hold steady on interest rates in December before starting to cut rates. Sometime next year.
Euro rises ahead of ECB meeting minutes; German PMIs are less weak
The EUR/USD pair rose in Europe, rising 0.3% to 1.0922, ahead of the release of the minutes of the European Central Bank's monetary policy meeting in October, a meeting that saw the ECB break an unprecedented series of 10 consecutive interest rate increases.
The euro was helped by the release of business activity data in the region for November. While French business activity contracted in November, there was some good news from Germany, the eurozone's dominant economy.
Manufacturing and service activity in Germany declined more slowly than in previous months, raising hopes that the recession may be less deep than expected.
The surprise victory of far-right candidate Geert Wilders in the Dutch elections has not had a noticeable impact on the euro market so far.
GBP/USD also rose 0.2% to 1.2521, with the pound rebounding slightly after falling on Wednesday in the wake of Chancellor Jeremy Hunt's autumn statement.
While he unveiled a series of measures in a bid to boost growth ahead of next year's elections, he also disappointed with expectations for very slow economic growth.
Japan's consumer price index is scheduled to be released on Friday
The Japanese yen/dollar pair traded in Asia, down 0.2% to 149.17, with the yen recovering from sharp overnight losses as the dollar recovered. Consumer inflation data for October is due on Friday, and is expected to provide further signals about the Bank of Japan's ultra-loose monetary policy plans.
The Australian dollar against the US dollar rose 0.4% to 0.6567 as Reserve Bank Governor Michelle Bullock reiterated her warning about persistent inflation, which may call for the central bank to raise interest rates further in the coming months.
The Chinese yuan fell against the US dollar by 0.2% to 7.1377, with the focus now on China's November PMI data, due to be released next week, for further signs on the economy after a series of weak October readings.