Headlines: Dollar advanced after mixed U.S. economic data
Main news:
- China’s central bank has been buying yen
- Crude oil declined as investors doubt OPEC’s cut
Forex outlook:
The dollar rose on Thursday after a bag of U.S. economic data strengthened the view of U.S. growth and inflation was easing. The U.S. core CPI, which excludes food and energy, increased 0.1 percent last month after gaining 0.2 percent in September and against consensus forecast of 0.2 percent. On a year-over-year basis, the core CPI advanced 2.7 percent in October from 2.9 percent a month earlier. Also a report showed manufacturing in the Philadelphia area advanced for the first time in three months. The data reduced speculation that the Federal Reserve will cut interest rate early next year. The dollar extended gains after Federal Reserve Bank of St. Louis President William Poole said the U.S. economy is not “out of the woods” on inflation. Fed Bank of Chicago President Michael Moskow said “some additional firming” of policy may be needed. The dollar rose to $1.2792 per euro from $1.2828. The U.S. currency touched an intraday high of $1.2785 after the release of the Philadelphia report. The dollar traded at 118.23 yen from 118.02. As most strategists said that is dollar-negative in the longer term after a U.S. report showed net flows into dollar-based assets decreased in September compared to August.
Bank of Japan has left its benchmark rate unchanged at 0.25 percent on Thursday. BOJ Governor Fukui’s comments signaled there is an “even chance” that the BOJ will raise interest rates by the end of December. China’s central bank has been purchasing yen as deputy governor Wu Xiaoling said, but she declined to say if the pace of buying yen has increased. Central banks in Russia, Switzerland and New Zealand are increasing holdings of yen, anticipating the currency will rebound from a 20-year low on rising interest rates and the longest economic expansion since World War II.
As today, investors are focusing on the euro zone foreign trade balance report, which has a positive impact on the euro if it is on a rising trend.
Gold: Gold futures fell for a fifthday to $621.70 an ounce on Thursday, as a drop in crude oil prices reduced the metal’s appeal as a hedge against inflation. The strengthened dollar had put more pressure on the gold. But investors expected the market to remain uncertain and gold to move in a wide range in the near future.
Crude Oil: Crude oil prices declined as profit-taking ahead of the expiry of the front month December U.S. crude oil contract on Thursday, as well as forecasts of mild U.S. weather that could cut heating demand. Prices were pushed further as investors sold contracts on speculation that members of the Organization of Petroleum Exporting Countries won't cut output.
