The dollar strengthened against its peers today overlooking poor US manufacturing data as fears surrounding the yuan’s devaluation subsided. US manufacturing output tanked to a near 6 year low as new orders declined considerably. Separate data revealed that US house builder sentiment surged to its highest level in 10 years in August. The dollar was supported as the market anticipates this Wednesday’s meeting minutes release by the Federal Reserve for indications on the timing of a rate increase. After the People’s Bank of China adjusted the yuan’s midpoint rate higher than Friday’s close market outlook in general was boosted.
The euro weakened against the dollar with the pair down 0.33% trading at 1.1074 coming off its session high of 1.1125. During the first half of this month the pair has seen a slight rally triggered by predictions of a Fed rate increase and it appears now that the market is waiting for something significant for prices to move considerably in either direction from current levels. Most likely the Fed will raise rates before the European Central Bank even begins to take a hawkish tone.
The pound weakened against the dollar coming off its session high of 1.5687 down to a low of 1.5578. The pair is currently trading at 1.5589 after trading steadily at 1.5650 earlier in the day. Over the weekend Forbes of the Bank of England remarked that interest rates need be increased “well before” its target for inflation is reached.
The yen weakened against the dollar with the pair trading at 124.36 close to its session high of 124.57. The yen overlooked poor Japanese GDP data for the 2nd quarter. Data revealed that the economy posted a growth decline of 0.4% for the 2nd quarter while a drop of 0.5% was expected. The data fueled speculation that the Bank of Japan will introduce further stimulus measures.
The Australian dollar strengthened against the greenback coming off its session low of 0.73441 to trade steadily at 0.7369. Last week the Aussie had dropped to 6 years lows against the greenback to 0.7214 after the yuan’s devaluation before regaining ground once China’s central bank announced there was no need for extended depreciation of its currency. The New Zealand dollar strengthened against the greenback with the pair climbing 0.56% trading at 0.6572 just off its session high of 0.6583.
The Canadian dollar weakened against the greenback with the pair reaching session highs of 1.3151. The pair has come off since rebounding off its session low of 1.3059 trading at 1.3091. The loonie was still vulnerable due to the drop in oil prices to 6 year plus lows as a result of surplus in global supply.
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