Dollar rises in late New York trade on rebound in U.S. yields: Oct 17, 2017

Market Review - 16/10/2017  22:16GMT  

Dollar rises in late New York trade on rebound in U.S. yields

Although the greenback traded broadly sideways against majority of its peers initially on Monday as investors remained cautious due to geopolitical tensions between U.S. and North Korea together with political woes in Europe regarding Spain and Catalonia, rise in U.S. Treasury yields in reaction to media report that U.S. President Donald Trump may pick Stanford University economist John Taylor who favoured raising U.S. interest as next Fed chief lifted the dollar in New York afternoon. 

Versus the Japanese yen, although dollar opened lower in New Zealand and dropped to 111.74, price staged a rebound to session high at 112.08 in Asian morning. However, the pair met renewed selling there and dropped to an intra-day low at 111.65 in early European morning on cross-buying of yen. Later, the greenback staged a recovery to 111.88 at New York open on upbeat U.S. data before jumping to 122.28 in late U.S. trade. 

The Empire State Manufacturing Index rose to a three-year high of 30.20 in October, beating analyst expectations of 20.70. In comparison, the index was at 20.40 in September. 

The single currency also opened lower in New Zealand and remained on the back foot, price weakeed to 1.1798 in Asian morning, then lower to an intra-day low at 1.1781 in early European morning on renewed political concerns over Catalonia. Despite a brief rebound to 1.1816 ahead of New York open on cross-buying of euro vs sterling, price retreated again to 1.1795 in New York morning. Although euro climbed to 1.1818 in New York, broad-based usd's strength on rising U.S. yields pressured price to 1.1789. 

The British pound opened higher and gained to 1.3311 in New Zealand before retreating to 1.3273 ahead of Asian open, then lower to 1.3269 at European open. Despite a brief rise to session high at 1.3312 in Europe, cable tumbled at New York open to 1.3246 on reports that Brexit negotiations were heading for a "catastrophic breakdown" before staging a recovery. However, cable later fell to session lows of 1.3226 due to renewed usd's strength in late U.S. trade.

Bloomberg cited comments from a person with knowledge of UK's position, who said Brexit negotiations are headed for a "catastrophic breakdown," unless the EU agrees this week to move on to trade agreements. 

In other news, UK Finance Minister Hammond said ' would not call negotiations with EU an impasse; it's vital that we talk to leaders of EU 27 nations, not just EU; relationship with European counterparts very constructive; biggest sticking point with EU is process; EU process not going to facilitate effective negotiations; personally does not think probability of no deal scenario for Brexit has increased; it's so blindingly obvious that it's in the best interest of all EU members that UK gets deal done; our very strong preference is to do a deal; we have to be ready for tariffs on trade, we don't think it will happen but have to ready for March 2019; economic relation with EU is my no.1 priority as Chancellor in Brexit talks.' 

Data to be released on Tuesday: 

New Zealand CPI, GDT price index, ZEW economic sentiment, ZEW current conditions, Italy trade balance, U.K. CPI, RPI, PPI input, PPI output, DCLG house price index, EU ZEW economic sentiment, CPI, and U.S. import prices, export prices, redbook, industrial production, capacity utilization, manufacturing output, NAHB housing market index.