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Dollar retreats in holiday-impacted trading; euro helped by German PMIs

Published 11/23/2023, 04:01 AM
© Reuters.
- - The U.S. dollar retreated in thin holiday-impacted trade Thursday, with traders digesting recent economic data and what it potentially means for the Federal Reserve’s interest rate policy.

At 03:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, fell 0.3% to 103.510, just above the 2-1/2-month low of 103.17 seen earlier this week. 

Dollar slips lower in thin volumes

The dollar received a minor boost on Wednesday after the weekly jobless claims data showed the number of Americans filing new claims fell more than expected last week, pointing to a still healthy labor market.

Additionally, the University of Michigan’s inflation expectations were revised higher, but this was countered by data showing orders for long-lasting U.S. manufactured goods fell more than expected in October.

That positive tone hasn’t lasted long, although trading volumes are limited with both Japan and the U.S. on holiday, the latter celebrating Thanksgiving. 

“Part of the rebound in the dollar observed over the past two sessions … may well be related to some profit-taking on risk-on trades and more defensive positioning ahead of Thanksgiving,” said analysts at ING, in a note.

The index is down about 2.5% so far in November and on course for its worst monthly performance in a year, with the market fully expecting the Fed to stand still on rates in December before starting to cut some time next year.

Euro gains ahead of ECB minutes; German PMIs less weak

In Europe, EUR/USD rose 0.3% to 1.0922, ahead of the release of the minutes from the European Central Bank’s October policy meeting, the gathering that saw the ECB snap an unprecedented streak of 10 consecutive rate hikes.

Helping the euro has been the release of the region’s business activity data for November. While French business activity contracted in November, there was some good news from Germany, the eurozone’s dominant economy.

Germany's manufacturing and services activity both fell more slowly than in previous months, raising hopes that a recession might be shallower than expected.

The surprise win of far-right candidate Geert Wilders in the Dutch elections has not had a noticeable market impact on the euro so far.

GBP/USD rose 0.2% to 1.2521, with the pound rebounding a touch after falling on Wednesday in the wake of Chancellor Jeremy Hunt’s Autumn Statement.

While he unveiled a series of measures in an attempt to boost growth before next year’s election, he also disappointed with a forecast for very sluggish economic growth.

Japanese CPI due Friday 

In Asia,  USD/JPY traded 0.2% lower at 149.17, with the yen recovering from steep overnight losses as the dollar recovered. Consumer inflation data for October is due on Friday, and is expected to provide more cues on the Bank of Japan’s plans for its ultra-dovish monetary policy. 

AUD/USD rose 0.4% to 0.6567 as Reserve Bank Governor Michele Bullock reiterated her warning over sticky inflation, which could potentially invite more interest rate hikes from the central bank in the coming months.

USD/CNY fell 0.2% to 7.1377, with the focus now on Chinese purchasing managers index data for November, due next week, for more cues on the economy after a string of weak readings for October.


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