CURRENCIES: Dollar Slides; Euro Finds Footing As EU Softens Italy Criticism
October 19 2018 - 11:36AM
Dow Jones News
By Anneken Tappe, MarketWatch
Investors digest sluggish China GDP and central bank
comments
Foreign exchange markets reflected an improvement in risk
sentiment after sluggish data on Chinese economic growth was offset
by words of support Chinese authorities on Friday.
Also, a European Union official softened criticism of Italy's
budget plans, helping soothe fears of a showdown between Rome and
Brussels and boosting the euro.
European Economic Affairs Commissioner Pierre Moscovici said
Italy was strongly committed to the EU and the euro
(http://www.marketwatch.com/story/italian-bond-yields-retreat-after-eu-commissioner-softens-budget-criticism-2018-10-19),
and that Brussels was not going to interfere in Italian economic
policies.
The euro improved following the comments, extending its modest
gains to $1.1485, up from $1.1453 late Thursday.
The fear of a budget battle between Italy and the EU over Rome's
deficit-expanding budget plans have been a concern for investors,
driving up Italian bond yields and putting pressure on shares of
Italian banks.
The eurozone's third-largest economy is feared to be too big for
a Greece-style bailout, and the threat of a budget fight has
amplified worries about demand for Italian government bonds after
the European Central Bank stops purchasing assets.
The full draft budget law will be submitted to the Italian
parliament by Saturday, where it will need to get approved by the
end of the year.
Late Thursday, China released its third quarter GDP growth
numbers--a highly anticipated data point for investors everywhere
as the health of China's economy has global growth implications.
Beijing reported 6.5% growth year-over-year between July and
September, down from 6.7% in the prior quarter and undercutting
expectations of 6.6%. It is the country's worst growth read since
2009
(http://www.marketwatch.com/story/chinas-growth-slows-to-weakest-pace-since-financial-crisis-2018-10-18).
The People's Bank of China, its securities regulator and banking
and insurance regulator issued statements Friday in support of the
stock market and positive economic fundamentals, soothing investor
concerns and leading Asian equities higher. China's Shanghai
Composite Index ended Friday 2.6% higher after dropping almost 3%
on the previous trading day.
Don't miss:Here's why investors are anxious about China's next
move
(http://www.marketwatch.com/story/heres-why-investors-are-anxious-about-chinas-next-move-2018-10-18)
The Chinese yuan, which had touched levels not seen since
January 2017 earlier this week, strengthened against a subdued U.S.
dollar in Friday trading. One buck bought 6.9292 yuan in Beijing,
and 6.9350 yuan in the offshore market.
The popular ICE U.S. Dollar Index was meanwhile down 0.1% at
95.787. The gauge is on track for a 0.6% gain for the week,
reversing the previous week's losses.
On the Brexit front, U.K. Prime Minister Theresa May said London
would be willing to extend its transition period by a year, which
was met with sharp criticism by pro-Brexit members of her own
party. An additional year of talks would mean more uncertainty for
the battered British pound for longer. In the year so far, sterling
has dropped some 3.5%.
One pound last bought $1.3043, up slight from $1.3018 late
Thursday.
According to a report by the Times of London
(https://www.thetimes.co.uk/article/revolt-grows-over-may-s-handling-of-brexit-talks-7qs6mwsch),
former Brexit Secretary David Davis is angling to serve as interim
leader in a potential leadership challenge to May amid anger some
Conservative members of parliament over the prospect of an
extension.
Elsewhere, the New Zealand dollar was leading top gainers among
developed market currencies, buying $0.6593, up from $0.6544 late
Thursday in New York, despite a lack of significant headlines.
"On the contrary, there was New Zealand-negative news in that
immigration continued to fall in September to nearly a four-year
low," said Marshall Gittler, chief strategist of ACLS Global. "That
hit the New Zealand dollar but only temporarily. It looks like
investors are just continuing to cut their short positions."
(END) Dow Jones Newswires
October 19, 2018 11:21 ET (15:21 GMT)
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