Dollar index rises, on track for best weekly gain of 2017

The U.S. dollar recovered earlier losses against many of its main rivals on Friday following a spate of economic data, putting it on track for the strongest weekly gain in the year-to-date at 1.1%, according to FactSet.

The dollar gauge was on pace to end September roughly 0.6% higher, making it the first monthly gain since February.

Where are currencies trading?

The ICE U.S. Dollar Index












DXY, +0.00%










which measures the buck against a basket of six major rivals, eased less than 0.1% to 93.194. It traded midweek at around the highest levels since Aug. 23, according to FactSet data, helping to salvage the slender monthly gain.

The WSJ U.S. Dollar index












BUXX, +0.01%










 which compares the dollar against 16 other currencies, was 0.1% weaker at 86.38.

Against its Japanese counterpart












USDJPY, +0.11%










the dollar last fetched ¥112.58, compared with ¥112.35 late Thursday in New York. Earlier this week, the U.S. currency traded above ¥113 for the first time since mid-July, according to FactSet data.

The euro












EURUSD, +0.2715%










 firmed to $1.1802, up from $1.1788 late Thursday in New York.

The British pound












GBPUSD, -0.3720%










 was buying $1.3354, down from $1.3441 on Thursday.

Against the Swiss currency












USDCHF, -0.2268%










the dollar was last buying 0.9705 francs, versus 0.9700 francs late Wednesday, after scoring its highest level since mid-June earlier in the week.

Against the Canadian dollar












USDCAD, +0.5311%










 the greenback rose to C$1.2489 from C$1.2428 late Thursday, after Canada’s gross domestic product by industry remained flat in July, compared with the FactSet consensus forecast of 0.1%.

What’s driving the buck?

Interest-rate differentials remain a key factor. The dollar rally has largely been supported by hints from the Fed that interest rates will go up in December, and rise a few more times in 2018. European Central Bank President Mario Draghi earlier in September indicated it will unveil plans to start scaling back its aggressive easing program in October. Meanwhile, the Bank of England hinted that rates could rise for the first time in a decade in November.

Elsewhere, the unemployment rate in Germany fell to a record low in September at 5.6% as jobless claims declined more sharply than expected. Eurozone inflation in September was stable at 1.5%, missing forecasts of a 1.6% reading.

Softer GDP data triggered a down move in the pound. U.K. GDP for the second quarter, at 1.5%, was down from previous estimates of 1.7%.

What are market participants saying?

“Part of the reason for [euro-dollar’s] sluggish performance can be explained away by a rebounding U.S. dollar, which has recently found support on renewed hawkishness from the Federal Reserve,” said Fawad Razaqzada. “From the eurozone, political uncertainty and disappointment that the European Central Bank has so far refused to taper QE despite an improving economy has also weighed on the euro. The ECB has also recently attempted to talk down the single currency, which has arguably worked so far.”

“The pound has come under some pressure on Friday having previously been on a great run on the anticipation that the Bank of England will raise interest rates this year,” said Craig Erlam, senior market analyst, at Oanda. “While the downside looks limited as long as the BOE follows through on rate hike plans, a sustained move above $1.36 against the dollar also looks a little far-fetched on the possibility of one hike and very gradual hikes thereafter.”

What are the data saying?

  • Personal income for August rose 0.2%, more than the MarketWatch consensus forecast of 0.1%, while consumer spending for the same month increased 0.1%, in line with the consensus.
  • August core inflation rose 0.1% on the month, missing expectations of 0.2
  • The Chicago PMI for September, measuring overall business activity, came in at 65.2, up from 58.9 in August.
  • September consumer sentiment was reported at 95.1, in line with MarketWatch consensus forecasts.

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