🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

US dollar flat, but on track for eight straight weeks of gains; yuan sinks

Published 08/09/2023, 02:25
Updated 08/09/2023, 20:20
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
EUR/USD
-
GBP/USD
-
USD/JPY
-
USD/CHF
-
AUD/USD
-
EUR/GBP
-
USD/CAD
-
NZD/USD
-
EUR/JPY
-
EUR/CHF
-
GBP/JPY
-
EUR/NOK
-
USD/SEK
-
AUD/CAD
-
AUD/JPY
-
GBP/CAD
-
NZD/JPY
-
USD/NOK
-
AUD/CNY
-
CAD/USD
-
GBP/CNY
-
USD/CNY
-
USD/CNH
-

By Gertrude Chavez-Dreyfuss and Samuel Indyk

NEW YORK/LONDON (Reuters) - The dollar was little changed on Friday, consolidating gains amassed during the week on better-than-expected U.S. economic data, even as the currency's underlying strong trend remained amid stable consumer and labor markets, which have kept the prospect of another rate increase on the table this year.

Despite Friday's pullback, the dollar index was headed for eight straight weeks of gains, the longest such streak since 2014.

"This week the market has been a little more nervy than usual on a number of fronts and that has lent to dollar strength," said Amo Sahota, director of FX at consulting firm Klarity FX in San Francisco.

He cited the continued escalation of the spat between the U.S. and China over the latter's iPhone restrictions, which have put Apple (NASDAQ:AAPL) AAPL.O in the spotlight.

There was also the narrative, he noted, that the Federal Reserve will keep interest rates higher for longer as the battle for inflation is still playing out.

"There's a lot of reasoning to ask whether dollar strength is going too far." Sahota said. "That may be, but in an environment where things could get nervy, the dollar always looks attractive," because of its yield advantage over other currencies due to the spate of Fed rate increases.

China's onshore yuan, on the other hand, ended its domestic session at its weakest since 2007, as it battles capital outflow pressures and a widening yield gap with major economies.

In afternoon trading, the dollar index =USD, which measures the greenback against six major peers, was flat at 105.05. It hit a six-month peak of 105.15 the previous session. The index so far this week was up 0.7%.

That said, Vassili Serebriakov, FX strategist, at UBS in New York, said while eight weeks are an unusually long stretch of dollar strength, the currency's gains are getting smaller every week.

"The market is quite long dollars already and the incremental upside has been small. So I think the market is having a hard time pushing the dollar significantly higher."

The euro EUR=EBS, the largest component in the dollar index, was on track for eight straight weeks of losses and down 0.7% on the week. It was last flat on the day at $1.0699, having fallen to a three-month low on Thursday.

Data out this week showed the U.S. services sector unexpectedly gained steam in August while jobless claims last week hit their lowest since February. In contrast, industrial production in Germany, Europe's largest economy, fell by slightly more than expected in July.

The chances of a Fed rate hike at the November meeting was still at more than 40%, although the market expects the U.S. central bank to hold interest rates steady later this month.

Sterling GBP=D3 moved away from Thursday's three-month low and last bought at $1.2459, down 0.1%, and set to clock a weekly loss of 1%.

The Canadian dollar firmed against the greenback after Canada created 39,900 jobs last month, compared with a median forecast for a gain of 15,000. The unemployment rate remained at 5.5%. The U.S. dollar was last down 0.3% versus the Canadian currency at C$1.3642 CAD=D3.

IN THE DOLDRUMS

The onshore Chinese yuan CNY=CFXS touched its weakest level against the dollar since December 2007 at 7.3510, while its offshore counterpart CNH=D3 sank to a 10-month low of 7.3665 per dollar.

China's currency has depreciated steadily since February as the faltering post-pandemic economic recovery and widening yield gap with other economies, particularly the United States, affected capital flows and trade.

The yuan's rapid decline has prompted authorities to step in and slow the pace of its depreciation.

© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

The struggling yen JPY=EBS was also in focus. The Japanese unit was last down 0.3% at 147.6 per dollar and on the weaker side of the key 145-level that prompted Japan intervention last year.

Japanese Finance Minister Shunichi Suzuki said on Friday rapid currency moves were undesirable and authorities wouldn't rule out any options against excessive swings, in a fresh warning to investors trying to sell the yen.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.