After several sharp interest rate hikes, a series of data showed that the US economy is slowing down, and the US dollar index fell on Thursday (19th). Meanwhile, the yen edged higher against the dollar as traders remained bet the Bank of Japan (BOJ) would eventually abandon its ultra-loose monetary policy.
In late New York trade, the ICE U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, was down 0.30% at 102.06.
Data on Thursday showed sluggish economic activity, with US housing starts down 1.4% in December and building permits also down 1.6%. A series of interest rate hikes weighed on the housing market. Meanwhile, the Philadelphia Fed manufacturing index rebounded to -8.9 from -13.7 in December, beating market expectations but still in contraction.
The U.S. labor market remains solid, with the number of people claiming unemployment benefits falling to 190,000 early last week, far below market expectations and the lowest since September last year.
OANDA senior market analyst Edward Moya said that the U.S. economy is clearly slowing down, the housing market is in recession, and the regional Fed survey results are weak, showing that business activity is struggling, but the unemployment benefits report shows that the labor market is still strong and must be beaten. Only by breaking this strong trend can inflation decline.
Mazen Issa, senior currency strategist at TD Securities, said that the market is currently one-way: short the dollar and long U.S. Treasuries. It will take time to change the direction of the market because the current data is not conducive to the Fed’s stance, that is, in the longer term. Keep interest rates at a high level for a period of time.
Still, Issa thinks it will be harder for the Fed’s message to resonate with the market after implementing so many austerity measures and seeing what the economic data show.
Fed officials are sticking to their hawkish views on interest rates. Susan Collins, president of the Federal Reserve Bank of Boston, sees the need to raise interest rates further, to a level just above 5% and then for some time; It has slowed down, but is still at a high level, and a strict policy stance must be maintained for a period of time to ensure that inflation falls back to the 2% level.
The yen recovered, with USD/JPY falling 0.37% to 128.41 yen. The Bank of Japan (BOJ) announced this week that it will maintain its ultra-loose monetary policy, which at one point dragged down the yen’s 2.7% drop in a single day.
Carol Kong, an FX strategist at Commonwealth Bank of Australia, said the yen’s rebound reflected that market participants were still speculating about the Bank of Japan’s policy shift.
The euro rose nearly 0.4 percent to $1.0831. European Central Bank (ECB) President Christine Lagarde (Christine Lagarde) reiterated at the Davos World Economic Forum that interest rates will continue to be raised to bring inflation back to the central bank’s target. “We will stay the course until rates enter restrictive territory for long enough to get inflation back to 2% in time.”
The Australian dollar fell for two consecutive days to about a one-week low, down more than 0.4% to US$0.6911. Earlier in Australia, the number of people employed unexpectedly fell in December.
The New Zealand dollar fell about 0.7 percent to $0.6394. New Zealand Prime Minister Jacinda Ardern unexpectedly announced that she will step down as prime minister next month and will not seek re-election, ending her prime minister’s term of about five years. The news once dragged the New Zealand dollar down more than 1%.
As of about 6:00 Taiwan time on Friday (20th) Price:
The dollar index was at 102.3596. -0.0387% The euro was trading at 1.0830 dollars to the euro. +0.3586% GBP/USD was trading at $1.2393. +0.3888% The Australian dollar is trading at 0.6911 US dollar (AUD/USD). -0.4007% The U.S. dollar was trading at 1.3464 Canadian dollars to the U.S. dollar. -0.1857% The U.S. dollar was trading at 128.40 yen per dollar. -0.2718%
