The dollar extended yesterdays’ rally at the start of today’s Asian trading, but fell back in late Asian session. Stronger-than-expected inflation and jobless claims data on Thursday boosted the dollar, calming fears about the strength of the US economy and raising the prospect of the Fed raising interest rates this year. Adding to the dollar’s bullish sentiment were comments by Cleveland Fed President Loretta Mester. Speaking at an event in New York, Mester said she believes the US economy can handle an increase in the fed funds rate as the economy is “at or nearly at full employment.”
The greenback’s rally took it above 119 yen on Friday but was unable to rise beyond 119.24 yen. The euro was still reeling from yesterday’s comments by ECB Governing Council Member Ewald Nowotny. Nowotny said that the ECB is clearly is missing its inflation target and that it may be necessary to use additional sets of instruments. The euro touched a low of 1.1358 dollars in early Asian session before making a modest recovery to 1.1391 dollars. It also rose slightly against the pound to 0.7359.
The pound maintained its positive momentum on the absence of any new data after this week’s strong unemployment figures. Cable was trading at 1.5476 in today’s Asian session, regaining all of Thursday’s losses following the better-than-expected US data.
The Aussie fell against a resurgent US dollar and as the Reserve Bank of Australia’s Financial Stability Review highlighted the weaknesses from emerging markets (particularly China) as well as the risks from segments of the country’s property market. Although there are no indications that the RBA will cut rates further this year, the weak employment report earlier this week and the concerns mentioned in the Financial Stability Review should keep the RBA on an easing bias. The Aussie dipped below 73 cents against the US dollar and was last trading at 0.7298.
The kiwi fell after inflation in New Zealand declined to a 16-year low of 0.3% in the third quarter. The figure was slightly better than estimates, but markets still expect further easing by the RBNZ. The New Zealand dollar fell slightly to 0.6838 against the greenback in late Asian session.
In commodities, oil prices attempted to bounce back from the recent sell-off despite a bigger-than-expected jump in US crude oil inventories. WTI oil futures rose over 1% to $47.01. While gold prices came off yesterday’s 7-week highs and were down at $1177.35 in late Asian session.
Looking ahead, Eurozone final inflation numbers for September will likely attract some attention. The data is expected to confirm the flash indication that the Eurozone fell again into deflation territory. A -0.1% year-on-year rate is awaited, while core inflation is doing better but running under 1% at 0.9%. Later in the session, US industrial output for September is expected to dip 0.2% month-on-month, while JOLTS job openings (for August) and University of Michigan preliminary consumer sentiment for October will also be key.