Monday, August 15

Dollar rebound continues as euro plunges


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The dollar continued to rebound

from prior-day losses on Friday as the euro plunged and currency

and bond markets tried to sort through inflation reports and

central bank comments amid end-of-month position adjustments.

The dollar index was up 1% around noon (1600 GMT) in

New York, more than reversing Thursday’s loss of nearly 0.6%.

The move put the dollar on track for its biggest one-day gain

since at least June and near a one-year high reached 17 days

ago.

The euro fell more than 1% in its biggest daily percentage

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loss since March 2020. On Thursday the euro booked its biggest

daily gain in five months.

The British pound fell 0.8% to $1.3680.

Volatility in the foreign exchange and the interest rate

markets has increased during the week as they tried to digest

central bank actions and economic reports. Next week could bring

more of the same around policy meetings of the US Federal

Reserve, the Bank of England and the Reserve Bank of Australia.

“A source of volatility could be this discrepancy between

what the markets are saying and what the central banks are

saying,” said Marc Chandler, chief market strategist at

Bannockburn Global Forex.

Month-end adjustments of positions are another factor,

Chandler said.

US Treasury yields rose after the government’s index of

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core personal consumption expenditures – the Fed’s preferred

inflation measure – climbed 0.2% in September, showing an

increase of 3.6% over 12 months.

US interest rate markets have been unusually volatile as

traders prepare for the Federal Reserve to raise rates around

mid-2022.

European data on Friday showed inflation in the 19 countries

sharing the euro rose to 4.1% in October from 3.4% a month

earlier, beating a consensus forecast of 3.7% and creating a

policy dilemma for the European Central Bank.

Germany’s 10-year bond yield rose on Friday as much as 8

basis points to its highest level since May 2019 and Southern

European government bond yields surged.

ECB President Christine Lagarde’s failure during a Thursday

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press conference to push back against market expectations of

higher interest rates has brought out bears, with Danske Bank

strategists expecting the euro to fall to $1.10 over the next 12

months.

“Investors are just not buying what the ECB is saying,” said

Marios Hadjikyriacos, a senior investment analyst at brokerage

XM. Markets are betting that inflation will force the ECB to

pull back on asset purchases sooner than planned.

Elsewhere, the dollar gained 0.4% against the Japanese yen

to 114.065.

The Australian dollar slipped nearly 0.5% to

$0.7509 after reaching the highest since early July at $0.75555

in the previous session.

In cryptocurrencies, ether rose to a record

$4,400 and was up 3% on the day, while bigger rival bitcoin

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gained 3% to $62,296.

================================================== ======

Currency bid prices at 12:02PM (1602 GMT)

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 94.2420 93.3620 +0.96% 4.735% +94.2560 +93.3200

Euro/Dollar $1.1543 $1.1683 -1.19% -5.52% +$1.1690 +$1.1543

Dollar/Yen 114.0650 113.5600 +0.45% +10.40% +114.0850 +113.3950

Euro/Yen 131.65 132.69 -0.78% +3.73% +132.9100 +131.6800

Dollar/Swiss 0.9167 0.9120 +0.53% +3.62% +0.9176 +0.9103

Sterling/Dollar $1.3680 $1.3795 -0.82% +0.14% +$1.3804 +$1.3681

Dollar/Canadian 1.2404 1.2342 +0.50% -2.59% +1.2407 +1.2328

Aussie/Dollar $0.7509 $0.7545 -0.46% -2.37% +$0.7555 +$0.7501

Euro/Swiss 1.0581 1.0652 -0.67% -2.09% +1.0655 +1.0571

Euro/Sterling 0.8436 0.8472 -0.42% -5.61% +0.8473 +0.8435

NZ $0.7154 $0.7205 -0.61% -0.28% +$0.7201 +$0.7137

Dollar/Dollar

Dollar/Norway 8.4605 8.3295 +1.47% -1.57% +8.4660 +8.3410

Euro/Norway 9.7674 9.7373 +0.31% -6.68% +9.7951 +9.7285

Dollar/Sweden 8.6004 8.5082 -0.16% +4.93% +8.6014 +8.5073

Euro/Sweden 9.9275 9.9439 -0.16% -1.48% +9.9624 +9.9261

(Reporting by David Henry in New York and Saikat Chatterjee in

London. Editing by Angus MacSwan and Raissa Kasolowsky)

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