Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

Dollar dips after weak U.S. data, Turkish hike supports emerging currencies

Published 09/14/2018, 12:11 AM
Updated 09/14/2018, 12:11 AM
© Reuters. U.S. dollar notes are seen in this picture illustration

By Shinichi Saoshiro

TOKYO (Reuters) - The dollar dipped on Friday after weaker-than-expected U.S. inflation data, with the currency already sagging on signs of reduced trade tensions between the United States and China.

Emerging currencies, like the South African rand and the Mexican peso, held onto to gains having surged, as investors in emerging markets registered relief that Turkey's central bank had hiked its policy rate to 24 percent to restore confidence in the lira.

The greenback took a hit overnight after the U.S. consumer price index (CPI), the government's broadest inflation gauge, rose just 0.2 percent in August and less than the 0.3 percent projected by analysts in a Reuters poll.

"The dollar has sagged mainly due to the soft U.S. CPI," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

The dollar's index against a basket of six major currencies was a shade lower at 94.491 (DXY) after slipping 0.3 percent on Thursday, when it touched 94.428, its lowest since Aug. 31.

The euro inched up 0.05 percent to $1.1695 (EUR=) after gaining more than 0.5 percent overnight when it brushed a two-week high of $1.1701.

The ECB kept policy unchanged as expected on Thursday, staying on track to end its bond purchases this year and raise interest rates next autumn.

The Turkish lira was a shade weaker at 6.137 per dollar <TRYTOM=D4> after ending the previous day on a gain of more than 4 percent.

The lira surged after Turkey's central bank raised its benchmark one-week repo rate by 625 basis points to 24 percent on Thursday, in a bid to stabilize the currency, which had slumped to a record low against the dollar a month ago.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

By tightening policy the central bank demonstrated an independent streak, as Turkish President Tayipp Erdogan is a self-declared enemy of high interest rates.

Following the lira's rally, the South African rand <ZAR=D4> gained 1.3 percent against the dollar on Thursday and the Mexican peso <MXN=D4> rose 1 percent.

MSCI's emerging markets currency index (MIEM00000CUS) bounced further away from a 16-month low reached earlier in the week.

"The rate hike by the Turkish central bank deserves praise but the key point going forward is President Erdogan's views on the monetary tightening," said Kota Hirayama, senior emerging market economist at SMBC Nikko Securities.

"It is naive to assume that Erdogan will continue respecting central bank independence. The Turkish central bank will lose credibility again and its rate hike will be wasted if monetary policy is disrupted by politics."

China's yuan was 0.2 percent weaker at 6.8520 <CNY=CFXS> in onshore trade after gaining more than 0.4 percent the previous day.

Data released on Friday showed China's investment growth for August fall to a new record low, while industrial output and retail sales for the month both rose by more than expected.

The Australian dollar, seen as a proxy for China-related trades as well as a barometer of risk sentiment, was nearly flat at $0.7194 <AUD=D4>.

The Aussie was headed for a gain of more than 1 percent on the week, having pulled back from a 2-1/2-year low of $0.7085 plumbed on Tuesday.

The dollar traded at 111.83 yen <JPY=> after climbing to 112.08 yen, its highest since Aug. 1, with rising equities dimming the Japanese currency's safe-have allure.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Latest comments

Lol. Who writes these headlines?
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.