The dollar strengthened against its peers today supported by solid US economic data after China’s central bank lowered interest rates in order to jump start economic growth on the back of a sharp decline in its stock market. The People’s Bank of China reduced interest rates to 4.6% by 25 basis points. The US consumer confidence index climbed to its highest level in 7 months to a reading of 101.5 in August from 91.0 in July while experts forecast an increase to 93.4.
Market unrest started back on August 11 when China suddenly devalued the yuan due to worry over the state of its economy. Subsequent sharp declines in Chinese equities generated concern that the world’s second largest economy is weakening and that the Chinese government may not be able to stabilize economic growth. A widespread selloff across global markets triggered by worry over a global economic drawdown with China at the helm has consumed the market over the past few days.
The euro weakened against the dollar tanking 1% with the pair trading at 1.1434 near its session low of 1.1398. The pair moved away from its 8 month high of 1.1713 reached on Monday having come off its session high of 1.1621 hit earlier in the day.
The pound erased gains after strengthening against the dollar with the pair trading near its low of the day of 1.5681 after coming off its 7 week high of 1.5818 reached earlier in the day. The pound’s advances were curtailed as the market became increasingly unsure as to when the Bank of England will increase its key interest rate. Weakening global outlook has delayed predictions for early 2016 to the 3rd quarter.
The yen weakened against the dollar with the pair gaining around 1% trading at 119.90 coming off its session high of 120.39 after reaching a low of 118.24 hit earlier in the day. The yen had given up gains overnight amid no major economic data out of Japan as US rate predictions set the stage.
The Australian dollar weakened against the greenback with the pair trading near its session low of 0.7127 after having strengthened against the dollar coming off its session high of 0.7250. The New Zealand dollar weakened against the greenback with the pair trading near its session low 0.6429 after having strengthened against the dollar coming off its session high of 0.6561. The Aussie and the kiwi were still affected by China due to their close trading ties. The Canadian dollar weakened against the greenback with the pair coming off its session low of 1.3143 reaching a high of 1.3345.
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