The dollar weakened considerably against its peers today tanking to 1 month lows as the market continued to assess the ramifications of a devalued yuan in its second day lower. China shocked the market on Tuesday after the People’s Bank of China devalued its currency by 2%. The yuan dropped to its lowest level against the dollar in 4 years after the PBOC lowered its midpoint rate weaker than Tuesday’s close. The devaluation was an attempt to boost China’s export market to trigger economic growth.
The euro strengthened against the dollar with the pair trading at 1 month highs of 1.1150 coming off its low of 1.1024 reached earlier in the session. The euro surged to a 6 month high against the yuan with the pair up 2.19% trading at 7.14.
The pound strengthened against the dollar with the pair up 0.34% trading at 1.5625 coming off its low of 1.5533 reached earlier in the session. The pound had weakened on the back of UK average weekly earnings data. Earnings excluding bonuses for the 2nd quarter remained unchanged from the 1st quarter at an annualized rate of 2.8%. Average weekly earnings including bonuses dropped from 3.2% in the 1st quarter to 2.4% in the 2nd quarter. Matching expectations the UK unemployment rate stayed at 5.6% for the 2nd quarter. UK jobless claims decreased by 4,900 to 792,400 in July.
The yen strengthened against the dollar with the pair down 0.92% trading at 123.97 coming off its high of 125.80 reached earlier in the session. The yen was supported by safe haven demand as demand for riskier assets was decreased by the sudden drop in equity and commodity markets.
The Australian and New Zealand dollars strengthened coming off 6 year lows against the greenback. The Aussie was up 0.72% against the dollar with the pair trading at 0.7356 off its session low of 0.7217. The kiwi dollar surged 1.32% against the greenback with the pair trading at 0.6622 coming off its session low of 0.6467. The Canadian dollar strengthened against the greenback with the pair down 0.98% trading at 1.2985 coming off its session high of 1.3156 reached earlier in the day.
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