The dollar weakened against its peers today as the euro was bolstered by remarks from European Central Bank President Mario Draghi, however the greenback still managed to garner support on chances of a Fed rate increase coming soon. Early this week officials from the Federal Reserve stated that a rate increase remains planned for some time this year. Financial markets grew weary following the release of data which revealed that China’s Caixin manufacturing PMI dropped from a reading of 47.3 in August to 47.0 in September while experts had forecast an increase to 47.5. The discouraging data intensified fear of a drawdown in global economic growth. The US dollar index was down 0.09% trading at 96.40 off its 1 month high of 96.65 hit earlier in the session.
The euro strengthened against the dollar with the pair trading at its high of 1.1209 after having come off its session low of 1.1105 reached earlier in the day. Remarks from Mario Draghi lessened predictions of a possible expansion of the ECB’s stimulus program in order to trigger euro zone economic growth. Draghi indicated that more time is necessary to analyze causes of current market volatility and to determine if lagging growth is fleeting or long lasting. Markit released data which revealed that Germany’s manufacturing PMI dropped from a reading of 53.3 in August to 52.5 in September, while its services PMI inched down from 54.9 to 54.3.
The pound weakened against the dollar with the pair down 0.74% trading at 1.5245 off its session low of 1.5220 after having come off its session high of 1.5366 reached earlier in the day as chances of a US rate hike increased demand for the dollar. The pound was still vulnerable from data released yesterday which revealed the UK’s biggest budget deficit for August since 2012 due to a 1.4 billion pound increase in public borrowing for the same period from a year earlier.
The yen weakened against the dollar with the pair trading at 120.15 off its session high of 120.54 after having come off its session low of 119.62 reached earlier in the day. Thin volume was traded as Japanese markets were closed again for the 3rd day of Silver Week in observance of Autumn Equinox. Japan is scheduled to release its flash manufacturing PMI data overnight.
The Australian and New Zealand dollars weakened against the greenback. The Aussie was down roughly 0.75% against the dollar with the pair trading at 0.6993 at its session low after having come off its session high of 0.7090 reached earlier in the day. The kiwi dollar declined roughly 0.5% against the greenback with the pair trading at 0.6242 off its session low of 0.6235 after having come off its session high of 0.6305 reached earlier in the day. The Aussie and the kiwi had been pressured by weaker conditions highlighted by the decline in China’s Caixin manufacturing PMI due to commodity export ties.
The Canadian dollar weakened against the greenback with the pair trading at 1.3342 off its session high of 1.3357 after having come off its session low of 1.3232 reached earlier in the day. Data released by Statistics Canada revealed that retail sales increased by 0.5% in July matching forecasts. Core retail sales which do not include automobile sales were flat while experts forecast an increase of 0.4%.
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