The US dollar is moderately declining against major world currencies on Thursday morning, investors evaluate the statements of the Federal Reserve Board and statistical data.
The ICE-calculated index, which shows the dynamics of the US dollar against six currencies (the euro, the Swiss franc, the yen, the Canadian dollar, the pound sterling and the Swedish krona), is down 0.2%, the broader WSJ Dollar is down 0.25%.
The euro/dollar pair is trading at $0.9920 by 9:08 Moscow time compared to $0.9885 at the close of the session on Wednesday, the euro adds about 0.35%.
The exchange rate of the American currency against the yen is reduced by 0.1% and amounts to 144.53 yen compared to 144.69 yen the day before.
The pound rose 0.1% to $1.1335 compared to $1.1327 at the close of the previous session.
The day before, the head of the Federal Reserve Bank of Atlanta, Rafael Bostic, said that he supports raising the key interest rate in the US by another 125 basis points by the end of the year, to 4.5%.
Meanwhile, San Francisco Fed colleague Mary Daly told CNN that the central bank should raise borrowing costs even higher and keep them high until inflation starts approaching 2%.
It became known yesterday that the index of business activity in the US services sector (ISM Non-Manufacturing) in September decreased to 56.7 points compared to 56.9 points a month earlier, data from the Institute of Supply Management (ISM) showed. Analysts, on average, assumed a more significant drop, to 56 points, according to Trading Economics.
Now all the attention of market participants is directed to data on the US labor market, which will be published on Friday. Experts believe that the unemployment rate in the country in September remained at the August mark of 3.7%, and the number of new jobs increased by 315 thousand people.
The dollar strengthens against the euro, yen and pound sterling in trading on Wednesday after a sharp decline the day before amid signals of a gradual decline in activity in the US economy.
Investors are waiting for data on the US labor market, which is expected to show a slowdown in job growth in the country. The consensus forecast of experts surveyed by Market Watch suggests that the number of jobs in September increased by 275 thousand (315 thousand in August), while maintaining unemployment at 3.7%.
The US Department of Labor will release the data on Friday at 3:30 p.m.
Another report from the Department of Labor, which was published on Tuesday, showed a sharp decrease in the number of open vacancies in the States in August. The indicator fell by 10% – the fastest pace since the start of the pandemic in 2020, to 10.1 million vacancies.
Weak statistics on the US economy are a good signal for risk appetite, as they speak in favor of a reduction in the trajectory of the Federal Reserve (Fed) rate hike, said Steven Innes, managing partner at SPI Asset Management.
Some “cooling” of the labor market will help ease inflation in the US and may reduce the need for further sharp tightening of monetary policy by the Fed, writes Dow Jones.
“If this trend continues, the Fed may back off somewhat in terms of rate hikes later this year and early next year,” said Jack Janasiewicz, portfolio manager at Natixis Investment Managers Solutions.
The euro/dollar pair is trading at $0.9966 on Wednesday, compared to $0.9987 at the close of previous trading. The pound fell to $1.1435 from $1.1475 at the close of previous trading.
The US dollar against the yen is 144.25 yen against 144.14 yen the day before.
On Tuesday, the dollar lost 1.7% against the euro, 1.4% against the pound and 0.3% against the yen.
The ICE-calculated index showing the dynamics of the dollar against six currencies (the euro, the Swiss franc, the yen, the Canadian dollar, the pound sterling and the Swedish krona) loses 0.11% during trading, the broader WSJ Dollar Index – 0.08%.
The euro/dollar pair is trading at $0.9846 compared to $0.9825 at the close of previous trading. The pound rose to $1.1361 compared to $1.1322 at the close of previous trading.
The US dollar against the yen is 144.75 yen against 144.56 yen the day before.
On Monday, the dollar lost 0.2% against the euro, 1.4% against the pound and 0.1% against the yen.
The weakening of the US currency was facilitated by statistical data showing a decrease in the index of business activity in the US manufacturing sector in September to the lowest level since May 2020. They were taken by the market as a signal that the Fed would have to stop the rate hike cycle earlier than expected in order to avoid a sharp decline in economic activity, Trading Economics notes.
The ISM Manufacturing Index fell to 50.9 last month from 52.8 a month earlier, according to the Institute for Supply Management (ISM). Analysts on average expected it to fall to 52.2 points, according to Trading Economics.
On Friday, September data on the US labor market will be released, which is expected to show a slowdown in US job growth. The consensus forecast of experts polled by Market Watch assumes an increase in the number of jobs in September by 275 thousand (315 thousand in August), while maintaining unemployment at 3.7%.
The dollar-denominated ICE index rose 7.2% in the third quarter, the biggest quarterly jump since 2015, according to Dow Jones data. In September, its value increased by 3.2%. The dynamics of the index for the whole of 2022 may be the best since 2014, when it grew by almost 13%.
The Japanese yen is depreciating against the US dollar on Monday morning.
The US dollar exchange rate against the yen at 8:56 am CST was 144.8 yen compared to 144.72 yen on Friday. During the session, the yen fell below 145 yen per $1, which could provoke the Japanese government to conduct foreign exchange intervention for the second time this year, writes Bloomberg.
The Japanese currency fell to 145.9 yen per dollar on September 22, after which the country’s Ministry of Finance decided to intervene in the foreign exchange market for the first time in 24 years. In total, authorities spent 2.84 trillion yen ($19.65 billion) in September to support the national currency, the ministry said.
The weakening of the yen comes against the backdrop of the Bank of Japan maintaining a loose monetary policy, while other central banks of the world have begun to tighten it due to inflation, beating multi-year records. In total, the yen has lost 21% since the beginning of the year.
“The yen is at risk of further depreciation as long as the BOJ’s yield curve control remains status quo and other central banks, including the Fed, continue to tighten or normalize policy,” said Oversea-Chinese Banking Corp. strategist. Christopher Wong.
Meanwhile, the ICE index, which shows the dynamics of the US dollar against six currencies (the euro, the Swiss franc, the yen, the Canadian dollar, the pound sterling and the Swedish krona), is down 0.27%, the broader WSJ Dollar is down 0.29%.
The euro/dollar pair is trading at $0.9822 compared to $0.9802 at the close of the session on Friday, the euro adds 0.2%.
The pound rose 0.7% to $1.1246 compared to $1.1168 at the close of the previous session.
The pound sterling again falls against the dollar due to renewed concerns about the British budget deficit amid announced tax cuts.
The pound by 9:05 a.m. fell 1% to $1.0782 compared to $1.0891 at the close of the previous session.
On the eve of the British currency rose after statements by the Bank of England about its intention to start buying long-term government bonds in an unlimited amount to stabilize the market, but the rise was short-lived.
Earlier this week, the pound hit a new all-time low against the dollar, and its fall since the beginning of the month could be a record since June 2016, when the British voted to leave the European Union.
The ICE-calculated index, which shows the dynamics of the US dollar against six currencies (the euro, Swiss franc, yen, Canadian dollar, pound sterling and the Swedish krona), rose by 0.85%, the broader WSJ Dollar – by 0.6%.
The euro/dollar pair is trading at $0.9668 compared to $0.9736 at the close of the session on Wednesday, the euro is losing about 0.7%.
The rate of the American currency against the yen increases by 0.4% and amounts to 144.64 yen compared to 144.12 yen the day before.
Meanwhile, the Chinese yuan is rising against the dollar for the first time in nine sessions. The yuan traded in mainland China rose to 7.1963/$1 from 7.2005/$1 at the close of the previous session.
The People’s Bank of China (PBOC, the country’s central bank) released a statement last night warning speculators that they would definitely lose money in the long run on betting on a weakening yuan and called on key market players to “protect the authority of the reference rate.”
The yuan on the mainland has fallen about 4% since the start of the month, and on Wednesday it hit a new low since 2008. Meanwhile, the offshore yuan traded in Hong Kong has fallen to its lowest level since the introduction of a separate trading system in 2010.
The Chinese yuan fell against the dollar to its lowest level since 2008 amid signals from Beijing weakening support for the currency.
The yuan, which trades on the territory of mainland China, fell to 7.2235/$1 compared to 7.176/$1 at the close of the previous session. The value is at the lowest level in 14 years.
The People’s Bank of China (PBOC, the country’s central bank) signaled it was prepared to allow the yuan to weaken, setting a reference rate of 7.1107 yuan/$1, the lowest level in more than two years. The market rate of the yuan may deviate from the reference rate by no more than 2% in one direction or another during the session.
The offshore yuan (traded in Hong Kong) fell to a record low since the introduction of the separate trading system in 2010 and stands at 7.2298 yuan/$1 by 09:00 Moscow time against 7.1795 yuan/$1.
Meanwhile, the US dollar is actively growing against other currencies on Wednesday morning. The ICE-calculated index, which shows the dynamics of the dollar against six currencies (the euro, the Swiss franc, the yen, the Canadian dollar, the pound sterling and the Swedish krona), adds 0.38% in the course of trading. The broader WSJ Dollar is up 0.3%.
The EUR/USD pair is trading at $0.9564 as of 9:10 Moscow time, compared to $0.9596 at the close of the previous session.
The pound sterling depreciates in the course of trading to $1.0696 compared to $1.0734 the day before.
And only the yen slightly rises against the dollar and is 144.67 yen at 09:11 Moscow time against 144.81 yen following the results of the previous session.
Experts believe that the US currency will continue to strengthen against the background of the rapid tightening of monetary policy by the Federal Reserve System (FRS). In addition, the dollar is supported by a decrease in risk appetite in world markets.
A further increase in volatility in financial markets will help strengthen the dollar due to its status as a “safe haven” currency, said Carol Kong, an analyst for the CBA foreign exchange market.
