Dollar Slightly Lower As Stocks Rally

Rich Asplund - Barchart - 1 hour ago

The dollar index (DXY00) on Thursday fell -0.056 (-0.06%). EUR/USD (^EURUSD) fell -0.0004 (-0.03%). USD/JPY (^USDJPY) rose +0.21 (+0.19%). The dollar on Thursday moved slightly lower. A rally in stocks on Thursday curbed the liquidity demand for the dollar. Losses in the dollar were limited as T-note yields rose after U.S. weekly jobless claims fell more than expected, which is hawkish for Fed policy.

EUR/USD (^EURUSD) on Thursday posted modest losses and remained just above Wednesday’s 14-1/2 month low. The euro was under pressure Thursday from weak Eurozone economic data and a report the ECB may implement a new bond-buying program. German Aug industrial production fell -4.0% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 16 months. Also, the ECB is reportedly studying a new bond-buying program, which would be negative for the euro. The new program would complement the open-ended QE plan that is currently purchasing 20 billion euros ($23.1 billion) in debt every month and would prevent market turmoil when the ECB’s PEPP plan gets phased out in March of next year.

USD/JPY (^USDJPY) on Thursday moved moderately higher. The yen weakened Thursday after the Japan Aug leading economic index CI fell -2.3 to a 6-month low of 101.8, weaker than expectations of 102.0. The yen was also under pressure Thursday after the BOJ cut its economic assessment for five of the country’s nine regions due to the summer surge in Covid infections and production cuts from supply shortages.

Thursday’s U.S. economic data was mixed for the dollar. On the negative side, U.S. Aug consumer credit rose +$14.379 billion, weaker than expectations of +$17.5 billion and the smallest increase in 7 months. Conversely, weekly initial unemployment claims fell -38,000 to 326,000, showing a stronger labor market than expectations of a decline to 348,000.

Hawkish comments on Thursday from Cleveland Fed President Mester were supportive for the dollar when she said, "I see the inflation risks as tilted to the upside."

December gold (GCZ21) on Thursday closed down -2.60 (-0.15%), and Dec silver (SIZ21) closed up +0.126 (+0.56%). Precious metals on Thursday settled mixed. A rally in stocks and higher T-note yields on Thursday weighed on metals prices. Conversely, a positive factor for precious metals Thursday was a weaker dollar.

The dollar and gold have continued safe-haven support from concern the worldwide spread of the delta Covid variant will crimp the global economic recovery. However, the pandemic in the U.S. has improved after the 7-day average of new U.S. Covid infections on Wednesday fell to a 2-month low of 101,468.

Dollar Slightly Lower As Stocks Rally (barchart.com)