Dollar Recovers After Setback
The U.S. dollar slipped against most of its peers, especially against the Euro, after the European Central Bank announced its monetary policy this morning.
However, it recovered as the session progressed and pared most of its losses and even firmed up against a few currencies.
Data on U.S. unemployment claims, Brexit woes and Japanese core machines orders too impacted dollar’s movements.
Data from Labor Department showed first-time claims for U.S. unemployment benefits came in unchanged in the week ended September 5th. The report said initial jobless claims came in at 884,000, unchanged from the previous week’s revised level. Economists had expected jobless claims to drop to 846,000 from the 881,000 originally reported for the previous week.
Another report from the Labor Department said producer prices in the U.S. increased by slightly more than expected in the month of August, with the index for final demand rising by 0.3% after climbing by 0.6% in July. Economists had expected prices to edge up by 0.2%.
The dollar index, which dropped to a low of 92.70, was last seen at 93.38, up 0.14% from previous close.
Against the Euro, the dollar weakened to $1.1917 after ECB’s policy announcement, but pared most of its losses as the day progressed. It was moving around $1.1820 a little while ago, down just about 0.13% from Thursday’s close.
The ECB left its key interest rates and the size of asset purchases unchanged, as expected, and reiterated that it stands ready to make adjustments to its tools when needed. The bank’s main refi rate was retained at a record low zero and the deposit rate was kept at -0.5%, in line with expectations. The lending rate was left unchanged at 0.25%.
The ECB said the Governing Council expects the key interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
The size of the pandemic emergency purchase programme (PEPP) was left unchanged at EUR 1,350 billion.
ECB President Christine Lagarde said in a press conference after the policy announcement that policymakers are watching the appreciation in the euro closely for any impact on prices, and reiterated that the bank stands ready to adjust all its tools when needed to support the fragile economic recovery in the euro area.
The Pound Sterling weakened to $1.2812, losing nearly 1.5%. Emergency talks between the U.K. and EU kicked off today over the former’s plan to undercut parts of the Withdrawal Agreement.
The Yen was up slightly at 106.14 after having firmed up to 105.92 in late Asian session. Data from the Cabinet Office showed that Japan core machine orders gained a seasonally adjusted 6.3 percent on month in July – coming in at 751.3 billion yen. That beat expectations for an increase of 1.9 percent following the 7.6 percent decline in June.
The Aussie was down more than 0.3% against the dollar, with a unit fetching $0.7258 as against yesterday’s close of $0.7283.
The Swiss franc was up at CHF 0.9105 a dollar, despite losing ground from CHF 0.9049. Against the Loonie, the dollar was gaining nearly 0.4% with a unit of greenback fetching C$1.3194.