The dollar index (DXY00) on Friday rose +0.502 (+0.53%). On Friday, the dollar index posted moderate gains and found some safe-haven support due to the worsening of the global pandemic. Also, weakness in EUR/USD is boosting the dollar as a plunge in German bund yields today weakened the euro’s interest rate differentials. The dollar extended its gains Friday on hawkish comments from Fed Governor Waller.
EUR/USD (^EURUSD) on Friday fell -0.0082 (-0.72%). EUR/USD on Friday sank to a new 16-month low. The euro was under pressure Friday as the surge in Covid infections in Europe prompted Austria to impose a nationwide lockdown. The news sent the 10-year German bund yield down to a 2-month low Friday at -0.343%, which is negative for the euro.
Comments on Friday from ECB President Lagarde were dovish for ECB policy and bearish for EUR/USD when she said she is "confident" that inflation pressures will ease over time and that the ECB shouldn't tighten monetary policy too soon, even in the face of "unwelcome and painful" inflation.
USD/JPY (^USDJPY) on Friday fell -0.27 (-0.24%). The yen shook off early losses Friday and rallied to a 1-week high against the dollar. A decline in T-note yields on Friday supported gains in the yen and weighed on USD/JPY. The yen initially weakened Friday on slack price pressures that are dovish for BOJ policy after Japan Oct national CPI rose +0.1% y/y, weaker than expectations of +0.2% y/y.
Comments on Friday from Fed Governor Waller were bullish for the dollar and negative for gold when he said, "the rapid improvement in the labor market and the deteriorating inflation data have pushed me towards favoring a faster pace of tapering and a more rapid removal of accommodation in 2022."
December gold (GCZ21) on Friday closed down -9.80 (-0.53%), and Dec silver (SIZ21) closed down -0.119 (-0.48%). Gold and silver on Friday fell to 1-week lows and closed moderately lower. Strength in the dollar on Friday undercut metals prices. Also, a rally in technology stocks that pushed the Nasdaq 100 up to a new record high Friday reduced the safe-haven demand for precious metals. A decline in global bond yields on Friday limited losses in gold prices.
The dollar and gold have continued safe-haven support from the negative impact of the worldwide spread of the delta Covid variant on the global economic recovery. The 7-day average of new U.S. Covid infections rose to a 6-week high of 97,006 on Thursday. Also, Germany reported its 7-day average of new Covid infections per 100,000 inhabitants climbed to a record 337 on Thursday.
