FX Rate News

A rally in the dollar faltered on Monday with strong U.S. data doing little to lift the currency or convince investors that a slowdown in activity is over.

The greenback traded in a narrow range as Japan kicked off a week of holidays, typically a period of thin liquidity that can prompt spikes in volatility.

A Federal Reserve policy meeting, Brexit negotiations and a raft of global data including on U.S. core inflation and payrolls could each be the trigger for big currency swings this week.

All eyes are on the Fed to see what its policymakers made of a first-quarter gross domestic product report that showed strong growth of 3.2 percent, but largely for one-off reasons including a surge in inventories.

“This is not the week during which we would be looking to put on large positions in FX in an attempt to profit from the market implications of one or more economic events,” said Stephen Gallo, European head of FX strategy at BMO Capital Markets in London.

“Nevertheless, our overwhelming bias with high conviction remains buying the USD on dips vs most of the rest of the G10 space.”

The aggregate dollar long position climbed to $33.6 billion on Monday, its highest level since December 2015, according to Scotiabank’s weekly CFTC sentiment report. The euro remains the largest held net short.

Against a basket of currencies, the dollar was a fraction softer at 97.970, having eased from a near two-year peak of 98.330.

The dollar fell back on Friday despite the upbeat GDP report because core inflation slowed sharply, leading speculators to narrow the odds on a rate cut this year.

Most other major central banks have also turned dovish in recent months, keeping their currencies subdued.

The Canadian dollar and Swedish crown, for instance, both took hits last week when their central banks put a halt on future rate hikes.

The European Central Bank is under pressure to keep its stimulus in place, if not to do a new round, while markets are pricing in rate cuts for Australia and New Zealand following weak inflation readings.

Some fear the lack of liquidity could lead to a re-run of the dollar’s flash crash from January when the yen made massive gains in a matter of minutes as bears were forced to cover short positions.

The euro was a shade firmer at $1.1157, but still not far from a near two-year trough of $1.1110. The euro has been broadly pushing lower since early January.

A swathe of manufacturing surveys from Europe and China are due later this week, along with a first reading on EU GDP. The U.S. payrolls report on Friday is forecast to show a solid increase of 180,000 in April, with unemployment at 3.8 percent.

The euro hovered near 22-month lows on Friday as traders waited to see whether U.S. GDP data due out later will reinforce signs of economic strength and send the dollar surging even higher.

After a small rise in volatility this week – albeit from multi-year lows – currency markets were quiet at the European open, with most major pairs stuck in tight trading ranges.

The dollar index versus a basket of six major currencies inched lower to 98.101 after advancing to 98.322 on Thursday, its highest since May 2017.

The euro rose 0.1 percent to $1.1140.

New orders for U.S.-made capital goods increased by the most in eight months in March. That followed other recent U.S. data that have eased fears of a sharp slowdown in the world’s biggest economy.

Data at 1230 GMT is expected to show that U.S. gross domestic product (GDP) increased 2.0 percent year-on-year in the first quarter.

“This week’s break in EUR/USD below $1.1200 has largely been a dollar story. Over the next few days, however, focus could return to Europe,” ING analysts said in a note, citing the election in Spain on Sunday, an S&P review of Italian sovereign debt ratings, and possible French economic reforms.

The Bank of Japan on Thursday put a time frame on its forward guidance for the first time by telling investors it will keep interest rates at super-low levels for at least one more year, in a move aimed at dispelling any doubt over its commitment to ultra-loose policies.

The yen was little changed on Friday, at 111.63 yen per dollar, after shedding 0.5 percent overnight.

“The Chinese PMI and the U.S. non-farm jobs report are due over the next week and both are expected to be quite good. There is also the next round of U.S.-China trade talks, which could further lift risk sentiment,” said Mitsuo Imaizumi, chief FX strategist at Daiwa Securities.

“The market could thus see a significant increase in ‘risk on’ during the Japanese holidays, pushing dollar/yen towards 113.00 yen.”

The Australian dollar rose 0.2 percent to $0.7027. The Aussie has lost nearly 2 percent this week, hitting a near four-month trough as soft domestic inflation data boosted the prospect of a rate cut by the Reserve Bank of Australia.

The New Zealand dollar rose 0.3 percent $0.6647.

Sterling, which has been hurt this week by dollar strength and concerns Brexit talks between the ruling Conservative and opposition Labour parties had run into the sand, clawed itself back above $1.29.

The dollar held near three-week highs on Tuesday as a drop in market volatility ramped up demand for riskier assets.

With 10-year U.S. Treasury yields up by more than 20 basis points over the past four weeks to a one-month high, demand for U.S.-denominated assets has grown.

Broader market moves were quiet as financial markets reopened after the Easter holiday.

The dollar index against a basket of six key rivals rose to 97.39, edging toward the 2019 high of 97.71 struck in early March.

“We are in a very range-bound market with the broader picture being more positive for the dollar relative to the euro after the weak eurozone PMI manufacturing data last week,” said Ulrich Leuchtmann, head of FX strategy at Commerzbank.

Data released overnight showed U.S. existing-home sales fell more than expected in March. Figures for new-home sales will be released later in the day.

Those may provide some pointers to the state of the U.S. economy. A clearer picture should emerge from the gross domestic product report set for release on Friday.

Support for the dollar came amid a general drop in market volatility. Expected moves in the euro/dollar exchange rate over a one-month period held near a five-year low of 4.50 vol.

The dollar’s moves against the euro and sterling were small, with the single currency lower at $1.1243 and the pound up at $1.2986.

The dollar edged up against key peers such as the euro and the yen on Monday, boosted by the relative strength of the U.S. economy, while losing ground against the Canadian dollar following a rise in crude oil prices.

Financial markets in Australia, Hong Kong and many major countries in Europe are closed on Monday for the Easter holiday. Currency trading continues globally but volume is expected to be light.

The dollar was lackluster against the loonie as crude oil prices rose more than 2 percent following a Washington Post report the United States is likely to ask all importers of Iranian oil to end their purchases or will be subject to U.S. sanctions.

The greenback has found support in recent weeks on the back of a gradual rise in U.S. 10-year Treasury yields and signs of strength in the world’s top economy, including better-than-expected retail sales in March, following a weak start to the year.

“It’s better to say that the euro has been weak rather than that the dollar is strong,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

“Traders have mostly priced in the weakness of the euro zone economy by now,” Ishizuki said. “It’s a little bit difficult to see the euro weakening further from here, so I think it will be hard for the dollar to strengthen.”

The dollar index was last down a tenth of a percent at 97.383, drifting slightly lower after booking a 0.4-percent gain last week.

The index remained within striking distance of its 2019 high of 97.71 brushed in early March.

Investors’ immediate focus will be on U.S. existing home sales for March, due at 1400 GMT, for further clues on the health of the U.S. economy.

“Yields on U.S. bonds have picked up a bit. I think the dollar is bought to a certain extent in reaction to that,” said Kazushige Kaida, head of foreign exchange at State Street Bank.

In February, U.S. home sales surged to their highest in 11 months, as the housing market showed renewed momentum following a pause in interest rate hikes by the Federal Reserve.

The euro gave up nearly 0.1 percent to $1.1240, adding to last week’s losses of nearly half a percent after data on Thursday showed that activity in Germany’smanufacturing sector shrank for a fourth straight month in April.

Sterling was last a shade lower at $1.2996, dipping below the $1.30 handle and nearly 0.4 percent off a two-month low of $1.2945 hit last month.

The Canadian dollar gained about a quarter of a percent to C$1.3360 on the back of the rise in crude oil prices following the Washington Post report.

Against the Japanese yen, the dollar was about 0.1 percent higher at 111.94 yen, within reach of this year’s peak of 112.17 hit on Wednesday last week.

Starting on Saturday, on Japan will have an unprecedented 10-day holiday from late April to early May to mark the ascension of the new emperor, Crown Prince Naruhito.

Daiwa’s Ishizuki said he expected currency trading by Japanese investors to remain relatively light as traders and companies are shifting into holiday mode.

The dollar steadied against a basket of currencies on Friday after hitting a 2.5-week high overnight as data pointed to a sturdy U.S. economy, while the euro was dented by weak manufacturing activity in Europe.

Many financial markets were closed for the Good Friday Easter holiday.

Currency markets remain open but volume is expected to be light.

The dollar index, which measures the greenback against a basket of six other major currencies, rose to as high as 97.485 overnight, its highest level since April 2. It last traded at 97.392 on Friday, down 0.1% on the day.

U.S. retail sales increased by the most in 1.5-years in March as households boosted purchases of motor vehicles and a range of other goods, the latest indication that economic growth picked up in the first quarter after a false start.

The economy’s strength was reinforced by other data on Thursday showing the number of Americans filing applications for unemployment benefits dropped to the lowest in nearly 50 years last week.

“In addition to the recent upticks in Chinese data, the latest U.S. retail sales numbers have helped to ease investor worries about the global economy. It’s pretty quiet trading due to the Easter holiday, though,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

The picture was less bullish in the euro zone as data on Thursday showed that activity in Germany’s manufacturing sector shrank for a fourth straight month in April.

The euro fell against the dollar to as low as 1.1226, its lowest level in 1.5 weeks, after the worse-than-expected data from the Europe’s largest economy.

The single currency was last up 0.1% against the U.S. dollar at $1.1242, up 0.1% on the day.

In contrast, the weak European data pushed the yen higher to its one-week high of 111.765 yen at one point on late Thursday. The yen last stood at 111.935 yen to the dollar, within the recent narrow range.

The release of Special Counsel Robert Mueller’s report on Russia’s role in the 2016 U.S. election had little impact on markets.

The yen hovered near its lowest level this year on Monday as more signs of stabilization in the Chinese economy and an upbeat start to the U.S. earnings season prompted investors to abandon the safe-haven currency to seek higher returns elsewhere.

The dollar firmed to 112.02 yen, near Friday’s high of 112.10, which was near its year-to-date high of 112.135 touched in early March.

The safe-haven Swiss franc has also eased against the euro, which strengthened to 1.1329 franc, recovering its losses made late last month to hit a three-week high on the franc.

The common currency traded at $1.1304, keeping intact its slow recovery from $1.1183 touched on April 2. It rose to as high as $1.1324 on Friday.

Chinese data published on Friday showed exports rebounded sharply and new bank loans increased far more than expected in March.

Although China’s imports remained weak, the data on the whole cemented hopes that the Chinese economy is bottoming out after a soft patch as Beijing has curbed de-leveraging efforts and stepped up support for the economy in recent months.

U.S. stocks also rallied on Friday on strong earnings from JPMorgan and an 11.5-percent jump in Walt Disney on news that it will start streaming services.

The S&P 500 index has reached its highest level in six months, coming within sight of testing a record high marked in September last year.

The more positive mood helped offset any concerns about upcoming trade talks between the United States and Japan, in which Washington is expected to include a currency provision in a bilateral trade agreement.

“We are seeing a classical risk-on market,” said Minori Uchida, chief currency analyst at MUFG Bank.

But Uchida also believes the dollar’s upside may be limited, given that speculators have already built up large long positions in the U.S. currency.

Data from U.S. watchdog on Friday showed speculators bolstered their net long U.S. dollar position in the latest week, pushing it to the highest since December 2015.

Against the yen, their net dollar long position was at the highest in about three months.

Elsewhere, the Australian dollar stood at $0.7173, having hit a 1-1/2-month high of $0.71925.

The British pound fetched $1.3080, stuck in its recent trading range as fears of a no-deal Brexit have receded for now.

The safe-haven yen remained in demand on Wednesday as investor caution prevailed due to fresh U.S.-Europe trade tensions and the International Monetary Fund’s downgrade of its global economic outlook.

Most major currencies were locked in narrow trading ranges as market participants largely kept to the sidelines ahead of a crucial Brexit summit meeting and a rate decision by the European Central Bank later in the day.

Broader sentiment in the market remained subdued as the flare-up between the United States and Europe added to other potential global flashpoints over trade, including Sino-U.S. negotiations.

“Now, there are battles on two fronts for the U.S.,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.

“If they’re going to be driving the global economy, it’ll be inherently more difficult if they’re fighting all these trade wars… on multiple fronts,” he said.

Against a basket of key rival currencies, the dollar drifted slightly higher to 97.036.

The dollar was a shade lower at 111.135 yen. From a more than three-week high of 111.825 brushed on Friday, the U.S. unit has fallen almost two-thirds of a percent.

Daiwa Securities senior currency strategist Yukio Ishizuki said the Japanese currency found further support ahead of an unprecedented 10-day holiday from late April to early May in Japan to mark the ascension of the new emperor, Crown Prince Naruhito.

“Above anything else, Japanese companies are conservatively managing operations. At the current stage, many of them will naturally be selling the dollar,” Ishizuki said.

“It’ll be easy for the yen to strengthen until the 10-day holiday is over,” he added.

The Australian dollar was up 0.1 percent at $0.7129, erasing an earlier loss after it found support on a speech from a senior Australian central bank official.

The Reserve Bank of Australia is keeping a close eye on how the divergence between a seemingly slowing economy and a strong labour market resolves itself to help determine where policy rates are headed, Deputy Governor Guy Debelle said.

On Monday, the U.S. Trade Representative proposed a list of European Unionproducts ranging from large commercial aircraft and parts to dairy products and wine on which to slap tariffs as retaliation for European aircraft subsidies.

The IMF on Tuesday slashed its global growth forecasts for 2019 to 3.3 percent, the slowest expansion since 2016 and from its earlier projection of 3.5 percent in January.

The global lender said a sharp downturn could require world leaders to coordinate stimulus measures.

Investors’ immediate focus on Wednesday will be on the ECB rate decision, a news conference by ECB President Mario Draghi and the release of minutes of the Federal Reserve’s last policy meeting.

Ahead of the Brexit summit meeting, the euro and sterling were largely unchanged, trading at $1.1258 and $1.3052, respectively.

European Union leaders will likely grant Prime Minister Theresa May a second delay to Britain’s exit from the EU but they could demand she accepts a much longer extension as France pushed for conditions to limit Britain’s ability to undermine the bloc.

The latest IMF forecasts, together with a pullback in oil prices, put pressure on commodity-linked currencies such as the Canadian dollar.

The loonie was a shade weaker at C$1.3334 after retreating overnight from its strongest level since March 21.