Yen surges, Euro, GBP rebound, Asia EMFX climbs
The Dollar Index (DXY), which measures the greenback against a basket of six major currencies, fell 0.9% to 102.92 from 103.87, its lowest level since early August.
The catalyst was a drop in U.S. Treasury yields after the Federal Reserve took a dovish stance at its December meeting. The Fed left its benchmark interest rate unchanged at 5.5%, but signaled a shift in policy.
Fed Chairman Jerome Powell reinforced the idea of a pivot when he noted that U.S. policymakers had discussed the prospect of rate cuts at the meeting. The US central bank hinted at deeper-than-expected rate cuts in 2024.
The yield on the benchmark 10-year U.S. Treasury note fell 10 basis points to 3.92%, a 4-month low. The 10-year rate, a key indicator of bond market sentiment and safe-haven demand, had surged above 5% in October.
Lower U.S. bond yields dragged the USD/JPY down to 141.83 in New York, down 0.7% from 142.30 yesterday. A week ago, the greenback traded at 145.00 against the yen.
The British Pound (GBP/USD) and the Euro (EUR/USD) both rebounded, gaining over 1% to close at 1.2757 (1.2620) and 1.0995 (1.0878), respectively. The euro rose to an overnight high of 1.1009 before settling. The Pound Sterling (GBP/USD) rose as high as 1.2794, its overnight high, before retreating by the close.
Both the European Central Bank and the Bank of England left interest rates unchanged yesterday, but signaled that borrowing costs will remain elevated for some time.
The Australian dollar (AUD/USD) jumped to close at 0.6697 from yesterday’s 0.6668. In volatile trading, the Aussie Battler rose to an overnight high of 0.6729 before easing.
The dollar fell against the Asian and emerging market currencies. The USD/CNH (dollar-offshore Chinese yuan) pair slipped to 7.1215 from 7.1400. Against the Thai baht, the U.S. dollar (USD/THB) settled at 34.90 from 35.30.
Stocks were higher on Wall Street. The DOW gained 0.3% to 37,195 from 37,080 yesterday, while the S&P 500 rose to 4,715 from 4,705. Australia’s ASX 200 climbed to 7,432 from 7,350.
Economic data released yesterday showed that Australia’s economy created 61,500 jobs, beating expectations of 10,600 jobs. However, Australia’s unemployment rate rose to 3.9% from 3.8%.
US headline retail sales rose to 0.3% from a downwardly revised -0.2%, beating forecasts for -0.1%. US Core Retail Sales rose to 0.2% from a downwardly revised 0.0%, beating estimates of -0.1%. US weekly jobless claims fell to 202K from 221K, beating forecasts of 219K.
AUD/USD – The Aussie Dollar jumped to an overnight and one-week high of 0.6729 before easing to 0.6697 in late New York trading. The overnight low was 0.6662 in choppy trading. The Australian dollar also rose against most of the major and emerging currencies.
USD/JPY – The dollar slipped to 141.83 in late New York trading, down from 142.30 yesterday. In another volatile session, the USD/JPY reached an overnight high of 142.91, while the overnight low was recorded at 140.94.
EUR/USD – The common currency bounced back to 1.0995 against a broadly weaker dollar in late New York trading. Yesterday, the euro traded at 1.0878 against the greenback. In choppy trading, the EUR/USD rose to an overnight high of 1.1009.
GBP/USD – The British Pound rose against the Dollar to close at 1.2757, up from yesterday’s opening price of 1.2620. The British Pound reached an overnight high of 1.2794, while the overnight low was 1.2612. The Bank of England left its key interest rate unchanged at yesterday’s meeting.
