Dollar weakens against majority of peers on risk aversion: Jan 8, 2016

Market Review - 07/01/2016 22:30GMT 
 
Dollar weakens against majority of peers on risk aversion

The greenback pared its early losses after Shanghai and Shenzhen stock exchanges said China will suspend its new market circuit breaker mechanism. Earlier in the day, the market circuit breaker mechanism was tripped for a second time this week.

Versus the Japanese yen, the greenback tumbled in Asian morning to 117.66 after the PBOC set the yuan midpoint at its lowest level since March 2011. Despite a brief recovery to 118.24 in Asia, renewed selling pressured the pair lower and price fell to a fresh near 4-1/2 month trough at 117.33 in European morning. Later, dollar pared its losses and rebounded strongly to 118.28 in New York morning on news that China will suspend its new market circuit breaker mechanism before falling to 117.44 near NY close.

The single currency traded with a firm bias in Asia and gained to 1.0830 ahead of European opening. Price briefly retreated to 1.0771 in early European morning before rallying to intra-day high at 1.0940 in near NY close, helped by cross-buying in eur/gbp.

The British pound met renewed selling at 1.4643 in Asian morning and weakened in Asia. Intra-day decline accelerated in European morning and cable tumbled to a fresh 5-1/2 year low at 1.4534 ahead of New York open on cross-selling of sterling vs euro. However, price pared its losses and recovered to 1.4629 near New York close before retreating again.

In other news, Fed's Lacker said 'u.s. central bank has not formally adopted definition of what is meant by 'gradual' pace of interest rate increases; median fed policymaker projection of four rate hikes in 2016 must be interpreted with care; shallower rate hike path makes sense if inflation doesn't rise toward 2% soon after oil prices bottom out and dollar peaks; "a more aggressive path would be in order" if inflation moves rapidly back toward 2%; economy beginning to see some hints of an acceleration in wage growth; real gdp likely to continue to grow in near term around the 2.2% rate seen since end of last recession; growth in employment and real gdp should start tapering off over the next year or two.'

On the data front, U.S. jobless claims came in at 277K vs forecast of 275K. EU retail sales mm and yy came in weaker-than-expected at -0.3% and 1.4% vs forecasts of 0.2.% and 2.0% respectively.

Data to be released on Friday:

Australia retail sales, Japan leading indicator, coincident indicator, Swiss unemployment rate, CPI, Germany imports, exports, trade balance, current account, industrial production, retail sales, France imports, exports, trade balance, Italy public deficit/GDP, U.K. goods trade balance, U.S. business optimism index, non-farm payrolls, unemployment rate, manufacturing payrolls, private payrolls, average earnings, wholesale inventories, wholesale sales, Canada unemployment rate, employment change, participation rate, full time employment change and building permits.