Dollar gains after relatively strong data, Aussie dollar tumbles

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

By Herbert Lash

NEW YORK (Reuters) - The dollar advanced against major currencies on Tuesday after relatively solid data on U.S. manufacturing and construction in June offset a decline in job openings last month to the lowest level in more than two years.

While an ISM survey offered a tough assessment of U.S. manufacturing conditions, so-called hard data suggested the sector is shuffling along. Federal Reserve data in June showed factory production rebounded in the second quarter, ending two straight quarterly declines.

Meanwhile, U.S. construction spending increased solidly last month and May's data was revised higher, boosted by outlays in both single and multifamily housing projects, the Commerce Department said.

In a third data set, the monthly Job Openings and Labor Turnover Survey, or JOLTS report from the Labor Department, remained consistent with tight labor market conditions despite the Fed's hefty interest rate hikes to dampen demand.

The dollar initially slid on the reports, but later rebounded.

"The net between the slightly more positive ISM and the slightly less favorable JOLTs numbers, you wind up in an environment the market doesn't know what to do," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC.

"The ISM numbers are really net neutral to slightly more constructive, but the reality is the offset in the JOLTs numbers with the continued high levels of openings in terms of what we got in terms of the quit rate," Ricchiuto added.

Despite the labor market's resilience, workers showed less appetite to seek greener pastures as resignations dropped by 295,000. As a result, the quits rate, viewed as a measure of labor market confidence, fell to 2.4% from 2.6% in May.

The dollar index, a measure of the greenback against six major currencies, rose 0.344% to a fresh three-week high.

Earlier, the Australian dollar fell sharply after the Reserve Bank of Australia left cash rates unchanged and the yen slid to a three-week low as tweaks by the Bank of Japan to its yield curve control policy continued to weigh on the currency.

The yen has swung wildly since Friday, when the BoJ began what may be a slow shift from decades of massive monetary stimulus. The central bank offered to buy 10-year Japanese government bonds at 1.0% in fixed-rate operations instead of the previous rate of 0.5%.

"When you look at all the major central banks, everyone has a firm handle on what the Fed is doing, the ECB and BoE," said Ed Moya, senior market analyst at OANDA in New York. "It's Japan that is really where all the focus is going to shift."

The adjustment to Japan's yield curve control policy is going to be the focus for the rest of the year, Moya added.

"Everyone is going to be watching all these key levels, such as 1.45, and when will we really get that strong hawkish signal from the BoJ?" Moya said.

The yen weakened 0.75% at 143.35 per dollar.

The Australian dollar posted its biggest daily decline since March after the central bank held rates at 4.1% for a second month, saying past hikes were cooling demand but more tightening might be needed to curb inflation.

The Aussie fell 1.61% versus the U.S. dollar at $0.661 to wipe out a 0.87% gain in July.

Private surveys showed that Asia's factory activity shrank in July, as the region's fragile recovery takes a hit from slowing global growth and weakness in China's economy.

The euro fell 0.12% to $1.098 as markets now price in a pause in rate hikes by the European Central Bank. Euro zone inflation fell further in July and the bloc returned to growth in the second quarter with a greater-than-expected expansion.

Sterling last traded at $1.2774, down 0.49% on the day.

Money markets now see a 60% probability that the Bank of England will hike rates by 25 basis points on Thursday. [IRPR]

Currency bid prices at 4:14 p.m. (2014 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 102.2300 101.8900 +0.34% -1.218% +102.4300 +101.8400

Euro/Dollar $1.0982 $1.0997 -0.15% +2.48% +$1.1003 +$1.0952

Dollar/Yen 143.3600 142.2700 +0.78% +9.36% +143.5400 +142.2150

Euro/Yen 157.42 156.45 +0.62% +12.22% +157.4900 +156.4300

Dollar/Swiss 0.8753 0.8720 +0.38% -5.34% +0.8777 +0.8715

Sterling/Dollar $1.2775 $1.2835 -0.49% +5.61% +$1.2840 +$1.2742

Dollar/Canadian 1.3285 1.3189 +0.74% -1.94% +1.3300 +1.3188

Aussie/Dollar $0.6612 $0.6719 -1.59% -3.00% +$0.6723 +$0.6603

Euro/Swiss 0.9610 0.9587 +0.24% -2.88% +0.9624 +0.9578

Euro/Sterling 0.8594 0.8565 +0.34% -2.83% +0.8606 +0.8551

NZ Dollar/Dollar $0.6147 $0.6210 -1.03% -3.20% +$0.6217 +$0.6132

Dollar/Norway 10.2080 10.0950 +1.14% +4.04% +10.2480 +10.1370

Euro/Norway 11.2120 11.1382 +0.66% +6.83% +11.2320 +11.1271

Dollar/Sweden 10.6043 10.5178 +0.66% +1.89% +10.6422 +10.5190

Euro/Sweden 11.6465 11.5702 +0.66% +4.46% +11.6580 +11.5685