Dollar Slightly Lower On Strong Stocks

Rich Asplund - Barchart - 1 hour ago

The dollar index (DXY00) on Friday fell -0.021 (-0.02%). EUR/USD (^EURUSD) rose +0.0006 (+0.05%). USD/JPY (^USDJPY) rose +0.57 (+0.50%). The dollar index on Friday posted modest losses. The main bearish factor for the dollar on Friday was the rally in the S&P 500 to a 3-week high, which reduced the liquidity demand for the dollar. However, the dollar found support Friday from higher T-note yields, which strengthened the dollar’s interest rate differentials.

EUR/USD (^EURUSD) on Friday moved slightly higher. EUR/USD was undercut by comments from ECB Governing Council member Villeroy who said price pressures in the Eurozone should be mostly transitory, which was dovish for Fed policy. EUR/USD was also undercut after Friday’s economic data showed Eurozone Sep new car registrations fell -23.1% y/y, the third straight monthly decline.

USD/JPY (^USDJPY) on Friday extended this week’s rally up to a 3-year high. The yen tumbled Friday on a report that said the BOJ at its Oct 28 policy meeting is likely to cut its 2021 Japan GDP growth forecast and also cut its inflation forecast for this year to 0% from 0.6%. The yen was also under pressure after the Nikkei Stock Index on Friday rallied +1.81% to a 2-week high, which reduced the safe-haven demand for the yen.

Friday’s U.S. economic data was mixed for the dollar. On the negative side, the U.S. Oct Empire manufacturing survey general business conditions index fell -14.5 to 19.8, weaker than expectations of 25.0. Also, the University of Michigan’s Oct U.S. consumer sentiment index unexpectedly fell -1.4 to 71.4, weaker than expectations for a small increase to 73.1. On the positive side, U.S. Sep retail sales unexpectedly rose +0.7% m/m, stronger than expectations of -0.2% m/m. Also, Sep retail sales ex-autos rose +0.8% m/m, stronger than expectations of +0.5% m/m.

December gold (GCZ21) on Friday closed down -29.60 (-1.65%), and Dec silver (SIZ21) closed down -0.128 (-0.55%). Precious metals on Friday posted moderate losses. Higher T-note yields on Friday undercut precious metals prices. Also, a rally in the S&P 500 to a 3-week high on Friday curbed the safe-haven demand for precious metals.

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 Monday fell to a 2-1/4 month low of 86,241.

Dollar Slightly Lower On Strong Stocks (barchart.com)