Friday, December 3

Dollar touches three-week high, lifted by recent data, Fed taper view


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NEW YORK — The dollar scaled three-week peaks on Friday, supported by

better-than-forecast US retail sales data released on Thursday that backed expectations for a reduction of

asset purchases by the Federal Reserve before the end of the year.

The dollar index, a gauge of the greenback’s value against six major currencies, rose to 93.220,

the highest since the third week of August. It was last up 0.4% at 93.207.

For the week, the dollar index gained 0.6%, its largest weekly percentage rise since mid-August.

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The Fed holds a two-day monetary policy meeting next week and is expected to open discussions on

reducing its monthly bond purchases, while tying any actual change to US job growth in September and

beyond.

“While we doubt that the FOMC will set out a plan for tapering its asset purchases, the new economic

projections may shed some light on its reaction function given building cyclical inflationary pressures,”

wrote Jonathan Petersen, markets economist at Capital Economics, in its latest research note.

“Our view remains that inflation in the US will stay elevated for longer than the FOMC and investors

Currently anticipate, in turn supporting higher US yields and a stronger dollar,” he added.

Speculation about a Fed taper this year gathered pace after US retail sales unexpectedly increased in

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August, data showed on Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A

business sentiment survey also showed a big improvement.

In afternoon New York trading, the euro slid 0.3% to $1.1729, after hitting a three-week low

of $1.1724 earlier in the session.

The University of Michigan consumer sentiment for September inched higher to 71 versus the final August

reading of 70.3, but overall analysts said the rise was nowhere near the improvements seen in the Empire

States and Philadelphia Fed manufacturing surveys.

The dollar held gains after the Michigan sentiment report.

Currency markets were generally quiet on Friday with traders reluctant to take on new positions ahead of

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a clutch of important central bank meetings next week including the Fed, the Bank of Japan and the Bank of

England.

The dollar was up 0.5% against the Swiss franc at 0.9320 francs, after earlier hitting a five-month high

of 0.9324 francs.

The dollar rose 0.2% to 109.92 yen.

The yen has shown limited reaction to the ruling Liberal Democratic Party’s leadership race, which

formally kicks off on Friday ahead of a Sept. 29 vote. The LDP’s parliamentary dominance means the party’s

new leader will become prime minister.

The dollar also rose to a two-week high against the offshore yuan and was last up 0.3% at 6.4711

. The yuan is being pressured by growing worries about China’s real estate sector as investors fear

property giant China Evergrande could default on its coupon payment next week.

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The British pound fell 0.4% to $1.3738 as UK retail sales undershot expectations. However, with

investors bringing forward forecasts for a Bank of England interest rate hike to mid-2022, sterling remains

supported.

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

Currency bid prices at 2:59PM (1859 GMT)

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

Previous Change

Session

Dollar index 93.1820 92.8730 +0.35% 3.557% +93.2200 +92.7600

Euro/Dollar $1.1729 $1.1768 -0.33% -4.00% +$1.1789 +$1.1724

Dollar/Yen 109.9250 109.7500 +0.16% +6.39% +110.0750 +109.6700

Euro/Yen 128.93 129.13 -0.15% +1.58% +129.6600 +128.9200

Dollar/Swiss 0.9323 0.9279 +0.46% +5.36% +0.9324 +0.9261

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Sterling/Dollar $1.3737 $1.3792 -0.38% +0.57% +$1.3812 +$1.3736

Dollar/Canadian 1.2742 1.2685 +0.44% +0.05% +1.2762 +1.2638

Aussie/Dollar $0.7273 $0.7295 -0.30% -5.45% +$0.7321 +$0.7266

Euro/Swiss 1.0933 1.0915 +0.16% +1.17% +1.0935 +1.0906

Euro/Sterling 0.8535 0.8528 +0.08% -4.50% +0.8553 +0.8523

NZ $0.7040 $0.7076 -0.53% -1.99% +$0.7086 +$0.7026

Dollar/Dollar

Dollar/Norway 8.6910 8.6385 +0.69% +1.29% +8.7075 +8.5925

Euro/Norway 10.1958 10.1410 +0.54% -2.59% +10.2139 +10.1136

Dollar/Sweden 8.6743 8.6210 +0.31% +5.83% +8.6896 +8.6038

Euro/Sweden 10.1750 10.1435 +0.31% +0.98% +10.1965 +10.1370

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Muralikumar Anantharaman, Alex Richardson and Sonya

Hepinstall)

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