Dollar rises vs yen on rally in global stocks: Dec 19, 2014

Market Review - 18/12/2014 22:44GMT

Dollar rises vs yen on rally in global stocks

The greenback traded mixed against other major currencies on Thursday, strengthened versus the single currency after the Federal Reserve said it expected to start raising interest rates next year on Wednesday, while weakening against the Japanese yen and the British pound.

Versus the Japanese yen, despite retreating from Australian high of 119.01 to 118.26 in European morning in part due to cross-buying in yen, price rebounded from there and ratcheted higher to a fresh intra-day high of 119.31 in New York morning, helped by upbeat U.S. jobless claims, however, release of U.S. Markit Service PMI, Philly Fed Business index and U.S. leading index painted a mixed picture for U.S. economy and the pair later retreated to 118.58 before moving sideways for the rest of the session.

On Thursday, The Department of Labor said the number of people who filed for unemployment assistance in the U.S. last week fell by 6K to 289K from the previous week's revised total of 295K. In a separate report, the Federal Reserve Bank of Philadelphia said manufacturing activity in the Philadelphia-region slowed in this month after expanding at the fastest rate since December 1993 in November, the index came in 24.5 in December, down from 40.8 last month. Later, the Conference Board Inc. said that U.S. CB Leading Index rose to a seasonally adjusted annual rate of 0.6%, from 0.6% in the preceding month whose figure was revised down from 0.9%, while Financial data firm Markit said its "flash" services Purchasing Managers Index hit 53.6 in December, down from November's final reading of 56.2 and well below economists' expectations for a rise to 56.9 as growth in employment and new business slowed.

The single currency remained under pressure on Thursday following a selloff in Wednesday New York session. Price moved sideways inside 1.2521-1.2552 in Asia and then tanked to 1.2477 in European morning due to the intra-day rally in usd/chf after negative rate announcement from SNB. Later, despite a recovery to 1.2338, renewed selling interest knocked euro lower to a fresh intra-day low at 1.2266 in New York morning before moving sideways for rest of the session.

News from Reuters reported, Switzerland's central bank (SNB) said it would start charging banks for deposits in francs for the first time since the 1970s, hoping to stem a flight to the safe-haven currency driven by concern over the euro zone and Russia's deepening crisis. SNB surprised the market and said in a statement on Thursday, 'confirms minimum exchange rate; is imposing negative interest rate of -0.25% on "sight deposit" account balances at the SNB; expanding the target range for the 3-mth LIBOR to -0.75% to 0.25%.' Later, SNB President Thomas Jordan said 'expects measures will remain in place for forseeable future.'

The single currency jumped sharply from 1.2007 to 1.2096 after the announcement from SNB before retreating to 1.2038.

The British pound strengthened versus the U.S. dollar after data showing retail sales in the U.K. rose much stronger than expected in November. During the day, although cable tracked euro's intra-day move closely and tanked from Asian high of 1.5594 to 1.5591 in European morning, buying interest above Wednesday's fresh 14-month trough at 1.5539 lifted price from there and the British pound later rallied to 1.5666 and then 1.5676 in New York before easing.

The Office for National Statistics said retail sales rose 1.6% last month, much higher than markets' expectation for a 0.3% gain. October's figure was revised up to 1.0% from 0.8% previously. On a year-on-year basis, retail sales posted a largest annual gain since May 2004 in November and jumped 6.4% after rising at an upwardly revised annual rate of 4.6% in October. Core retail sales, which exclude automobile sales, were up 1.7% and rose 6.9% from a year earlier.

Friday will see the release of New Zealand's NBNZ Business Outlook, Japan leading economic index, BoJ rate decision, BoJ monetary policy statement and BoJ Governor Kuroda's press conference, Germany's Gfk Consumer confidence, Gfk Consumer Sentiment, Producer Prices, France's Business Climate, Eurozone's Current Accounts, Italy's Industrial Sales, U.K.'s Gfk Consumer Confidence, PSNCR, PSNB, CBI Distributive Trades, Canada's CPI and Retail Sales.