The U.S. dollar faces a challenging final stretch in 2023, heading for its worst year-end performance since 2020. The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rebounded from a five-month low of 100.62 on July 5 to 101.22 (previously 101.42).
Although U.S. bond yields have recovered slightly, they are still hovering near the lows not seen since July 2023. The U.S. 10-year Treasury bond rate closed at 3.84%, down slightly from 3.89% a week ago. Global bond rates have also eased, albeit to a lesser extent.
USD/JPY weakened to 141.45 (from 142.45 a year ago) on speculation that the Bank of Japan may abandon negative interest rates. USD/JPY plunged to an overnight low of 140.25 before rebounding.
Bank of Japan Governor Kazuo Ueda suggested the central bank may not wait for wage talks, suggesting action could come before April.
Sterling (GBP/USD) suffered a setback, slipping to $1.2725 after hitting an overnight 20-week high of $1.2828. The pound’s moves were exacerbated by thin trading volumes at the end of the year.
The Australian dollar (AUD/USD) eased to 0.6832 from overnight and 5-month highs of 0.6871. The Australian dollar was supported by rising commodity prices and broad dollar weakness.
The euro (EUR/USD) eased back to 1.1065 in New York trade after hitting overnight and three-month highs of 1.1140. Volatile year-end trading conditions dominated the euro’s performance.
The dollar fell against mostly Asian and emerging market currencies. USD/CNH fell to 7.1165 from 7.1415, while USD/SGD fell to 1.3202 from 1.3235.
On Wall Street, stocks closed with mixed results. The Dow closed at 37,790 (down from 37,630) and the S&P 500 ended at 4,793 (down from 4,798). Australia’s ASX 200 ended at 7,605 points, from 7,599 points earlier.
Economic data released included Japan’s annual retail sales, which climbed to 5.3% from 4.1% previously, beating estimates of 5.1%. In the U.S., weekly jobless claims rose to 218,000 from 205,000, slightly above expectations of 211,000.
In the foreign exchange market, the USD/JPY exchange rate was volatile, falling from 142.45 to 141.45, hitting an overnight low of 140.25. The euro (EUR/USD) fell 0.4% to trade at 1.1065 after hitting a five-month high of 1.1139. The Australian dollar (AUD/USD) rebounded from 0.6822 to 0.6834, while the British pound (GBP/USD) fell to 1.2725 after hitting a 20-month high of 1.2828. GBP/JPY also fell, falling from 181.25 to 180.03.
