Dollar at October lows as weak Wall Street sours sentiment, euro firms
The U.S. dollar traded at its lowest level this month against its major peers on Friday as declining U.S. treasury yields and further losses on Wall Street soured sentiment.
The dollar index, a gauge of its value against six major currencies, traded at 95 on Friday, down from its monthly high of 96.15 hit on Tuesday.
The Dow Jones Industrial Average closed at a two-month low of 25,052 on Thursday, down 2.13 percent, while the S&P 500 ended 2.05 percent lower. The Dow has lost around 7 percent from an all-time high of 26,951 hit on Oct. 3.
A weaker-than-forecast rise in U.S. consumer prices undermined the dollar as traders cut back their wagers on the U.S. Federal Reserve stepping up the pace of its planned rate hikes.
Fed officials said last month they expected three rate hikes in 2019, and some have said they are open to a rate increase in December, which would be the fourth this year.The benchmark 10-year Treasury yield fell to 3.1705 percent on Friday, after hitting a seven-year peak of 3.261 percent on Tuesday.
The euro was the primary beneficiary of broad-based dollar weakness on Friday, hitting a fresh weekly high at 1.6009 on the back of dollar selling and a positive tone in minutes of the last European Central Bank (ECB) meeting.
The minutes suggested the ECB was on track to normalise its ultra-loose monetary policy this year despite concerns about slowing growth in Europe.
“We’ve heard quite a bit of comment from euro zone policymakers recently about rising inflation including from (ECB) President Draghi and the message is consistent, which is that price pressures are growing,” said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management.
“Part of this is due to the higher oil prices but the weaker euro also boosts inflation,” she added, noting there could be more dollar/euro short covering with multiple moving average resistance points between 1.1.1580-1.1630.The Japanese yen, which is a preferred currency in times of market turbulence, traded at 112.34 on Friday. It had strengthened to 111.83 versus the dollar on Thursday, its highest since Sept. 18.
Singapore’s central bank tightened monetary policy for the second time this year on Friday. The Singapore dollar changed hands at 1.3739.The Australian dollar was at $0.7122, recovering from a two-year low of $0.7039 hit on Monday. The rally was aided by promising news out of China, its biggest trade partner.
“Commodity prices suggest the Australian dollar should push higher and there are calls in Chinese media for fiscal stimulus to support growth as Chinese exporters struggle with U.S. tariffs,” said Sean Callow, senior currency strategist at Westpac in a research note.
The Canadian dollar changed hands at 1.3024.
The U.S. dollar has gained almost 1 percent versus the loonie in October.
The New Zealand dollar traded relatively unchanged at 0.6518 on Friday.
Gold traded at $1,220 per ounce on Friday, down 0.22 percent. It staged a 2 percent rally on Thursday in the face of dollar weakness and global financial uncertainty.