Dollar retreats broadly on profit taking after initial gain due to rising U.S. yields: Oct 19, 2017

Market Review - 18/10/2017   22:20GMT 

Dollar retreats broadly on profit taking after initial gain due to rising U.S. yields

Despite continuing this week's gain against its peer currencies on Wednesday due to rise in U.S. Treasury yields, the greenback erased intra-day gain in New York session on profit taking and ended little changed as market awaits updates on appointment of new Federal Reserve Chair and anticipation of Fed rate hike later this year.  

Versus the Japanese yen, dollar met renewed buying at Asian open at 112.14 at Asian open and started climb strongly in Europe on back of rising U.S. yields, price easily penetrated Tuesday's high at 112.48 to a fresh 1-week peak of 113.05 in NY session and traded at 112.93 near the close.  

Although the single currency briefly edged up to 1.1781 at Asian open on short covering, renewed selling quickly emerged and knocked price to a fresh 1-week low of 1.0730 in Europe due to usd's strength before rallying to 1.1804 in late New York trade partly on cross-buying especially versus the yen and chf.  

The British pound swung wildly in volatile trading. Despite trading sideways with a soft bias in Asia, cable briefly spiked up to 1.3213 on slightly higher-than-expected U.K. wage growth data, price sharply retreated and fell to session lows of 1.3140 on concerns that wages have steadily fallen behind inflation. However, price rebounded in tandem with eur/usd in New York session and climbed back to 1.3206 near the close.  

The Office for National Statistics said on Wednesday that workers' total earnings, including bonuses, rose by an annual 2.2 percent in the three months to August and it slightly revised up growth in the three months to July to 2.2 percent as well. Economists taking part in a Reuters poll had expected wage growth of 2.1 percent.  

Wages have steadily fallen behind inflation which hit 3 percent in September, its highest level in more than five years. In August alone, total wages picked up speed to grow by 2.2 percent after a slowdown in July to 1.7 percent.  

On the data front, the U.S. Commerce Department said that housing starts decreased by 4.7% from the month before to hit a seasonally adjusted 1.127 million units last month from August’s total of 1.183 million units, which was an upward revision from the initial 1.180 million. Analysts had expected September’s number to decrease just 0.5% from the prior month’s initial reading to 1.180 million.  

Data to be released on Thursday: 

Japan exports, imports, trade balance, all industry activity index, Australia employment change, unemployment rate, China industrial output, retail sales, GDP, Swiss trade balance, exports, imports, U.K. retail sales, and U.S. initial jobless claims, Philadelphia Fed survey, leading indicators.