CURRENCIES: Dollar Slides As British Pound And New Zealand's Kiwi Rally On Data
September 20 2018 - 4:00PM
Dow Jones News
By Anneken Tappe
The U.S. dollar weakened Thursday, partly due to a buoyant
British pound and New Zealand dollar, which were both trading
higher on the back of better-than-expected economic data.
Trade headlines dominated North American trading, though much of
investors' attention was focused elsewhere. In the latest
developments surrounding the North American Free Trade Agreement, a
Bloomberg report
(https://www.bloomberg.com/news/articles/2018-09-19/u-s-canada-trade-sharper-barbs-before-resuming-nafta-talks)
quoted unnamed sources saying that a deal between Canada and the
U.S. was unlikely this week.
The ICE U.S. Dollar Index was down 0.6% at 93.926, hovering
around a two-month low, despite reversing some earlier weakness
against the Canadian dollar , last buying C$1.2912, down 0.1% from
Wednesday.
The New Zealand dollar led developed-market currencies as one of
the best performers early Thursday, after a report on
second-quarter real gross domestic product showed that the New
Zealand economy expanded 2.8% year-over-year, beating the
expectation of 2.2%.
The kiwi dollar, as the antipodean currency is also known, last
bought $0.6688, its highest in three weeks, up from $0.6617 late
Wednesday in New York.
In Salzburg, Austria, a European Union summit concerning Brexit
is under way, adding the potential of volatility-inducing headlines
to Thursday's session.
Read:Why another Brexit summit is unlikely to put investors at
ease
(http://www.marketwatch.com/story/why-another-brexit-summit-is-unlikely-to-put-investors-at-ease-2018-09-18)
U.K. retail sales for August beat expectations, kicking the
trading day off in a similar fashion to Wednesday, when the British
pound was pushed in pulled into different directions
(http://www.marketwatch.com/story/dollar-drifts-lower-as-brexit-talks-data-make-for-volatile-british-pound-2018-09-19)
after a higher than expected inflation read stoked ideas about
future rate increases and a report from the Times of London said
U.K. Prime Minister Theresa May was going to reject the EU's new
Irish border proposal.
In Thursday's headlines, European Council President Donald Tusk
said May's Chequers Brexit trade plan wouldn't work, according to
reports. Market participants judge the summit to have gone worse
for May than the EU, which will now overshadow the Conservative
Party conference next week.
The pound was at its strongest since mid-July, buying $1.3268,
compared with $1.3143 late Wednesday.
Meanwhile, the euro rose to $1.1775 from $1.1673. The
euro-sterling pair saw the euro slide versus its British rival,
buying GBP0.8876, down 0.1%.
Also in Europe, the Swiss National Bank kept its policy
unchanged, leaving the Swiss franc to strengthen against the U.S.
dollar. One buck last bought 0.9594 francs, compared with 0.9671
francs late Wednesday in New York.
"After strengthening noticeably since May, the perceived
safe-haven Swiss franc has eased back a little over the past few
days as risk assets rallied on relief that the trade dispute
between China and the US would ease," said Fawad Razaqzada, market
analyst at Forex.com.
Though market expectations for the ultra-dovish SNB were to
leave things as they were, investors were looking for clues as to
whether the central bank thought its currency was getting too
string.
"Well as it turned out, the SNB was surprisingly relaxed about
the currency's recent strength, once again describing the franc as
merely being "highly valued," Razaqzada said. "Still, the SNB being
among the most dovish central banks out there, would not dare give
the wrong impression. So to offset the fact that it maintained the
language on the Swiss franc, the SNB lowered its inflation
forecasts for 2019 and 2020 while suggesting that "the pace of
growth is expected to slow slightly."
In emerging markets, Turkey is in focus as the government is due
to reveal its medium-term macroeconomic policy plan Thursday. The
government cut its growth forecasts for the year, putting GDP
growth expectations at 3.8% in 2018 and 2.3% in 2019, compared with
previous forecasts of 5.5%. Inflation expectations for year-end
were above 20%, reflecting how much consumer prices had heated up
all year and how much the ailing lira had pushed them up. The 2019
CPI forecast was around 16%, before falling to 10% in 2020.
The Turkish lira softened against both the dollar and the euro,
ahead of the announcement. One dollar bought 6.1901 lira, down 1%,
while the euro fetched 7.2904 lira, down 0.1%.
(END) Dow Jones Newswires
September 20, 2018 15:45 ET (19:45 GMT)
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