Dollar Wobbles But Set for Weekly, Monthly Gains
The U.S. dollar swung between gains and losses Friday, but the currency was poised to notch a weekly advance after Syrian-related tensions weighed on risk appetite and aided the greenback.
The ICE dollar index DXY -0.10% , a measure of the U.S. unit against six rivals, fell to 81.911 from 81.940 late Thursday. During early Friday trade, the index rose as high as 82.02 and fell as low 81.90, according to data from FactSet. It was on pace to rise 0.5% for August.
The WSJ Dollar Index XX:BUXX -0.12% , which uses a wider comparison basket than the ICE index, slipped to 74.21 from 74.39. It was on track for a monthly gain of 0.2%.
For the week, the ICE index was facing an increase of 0.7%.
The dollar has recently shot higher against many emerging-market currencies, some of which were sent to all-time lows “as Fed tapering concerns and fears over an early U.S.-led military strike on Syria sparked risk aversion,” according to analysts at Danske Bank in a note Thursday.
The Brazilian real USDBRL -0.08% and the Turkish lira USDTRY -0.11% were among the currencies hit hard this week. Among exchange-traded funds, the WisdomTree Emerging Currency Fund CEW +0.26% was off 0.9% for the week ahead of U.S. trade Friday.
On the geopolitical front, the U.S. accused the Syrian government of using chemical weapons against civilians in a recent attack near Damascus, and worries about military action in Syria swept through financial markets worldwide.
But heading into the weekend, the U.K. Parliament voted to reject the use of force in Syria. Meanwhile, the White House told U.S. congressional leaders that a potential strike on Syria would focus on removing the regime’s chemical-weapons capability.
“Even though the pressure on the emerging-market currencies calmed down somewhat over the past 24 hours as the idea of an early military strike was abandoned, we believe the relief could be short-lived,” said Danske Bank.
The Indian rupee was a stand-out decliner this week, slammed as the dollar USDINR -1.14% at one point was able to buy more than 68 rupees compared with around 63.35 the previous Friday.
The rupee had already been under pressure, along with other emerging-market currencies in countries running current-account deficits.
U.S. Treasury yields have risen on the prospect the Federal Reserve will soon reduce monetary stimulus, and higher U.S. yields attract capital away from the emerging markets.
But the rupee came off its lows after India’s central bank on Wednesday said it would sell U.S. dollars to oil companies to defend the currency.
Also, the country on Friday was reportedly exploring ways to reduce fuel consumption. That could ease India’s need for crude-oil imports that have helped widen the deficit.
The dollar on Friday was at 66.590 rupees, little changed from late Thursday.
India was due to release its fiscal-first-quarter gross domestic product figures later in the day.
Economic Focus
Later Friday, investors will get a look at manufacturing activity in the Chicago region in August, which is expected to show an increase.
Figures on U.S. consumer sentiment and consumer spending are also due. The spending report, the first look at such activity for the third quarter, is projected to show a 0.3% in July, down from 0.5% in the prior month.
The U.S. dollar on Thursday rose against major rivals after second-quarter U.S. economic growth was revised higher, to 2.5% from a previous reading of 1.7%. Analysts polled by MarketWatch had expected a revision to 2.3%.
The Federal Reserve has said it plans to slow the rate of its bond purchases because of improvement in the economy. The Fed now buys $85 billion a month in assets, which has been seen as weighing on the greenback.
Meanwhile, the dollar USDJPY -0.38% slipped against the Japanese yen, trading at ¥98.17, down from ¥98.23 late Thursday.
The dollar had been buying ¥98.33 before Japan posted mostly upbeat economic data Friday, including the best gain for headline consumer inflation since November 2008. The government of Prime Minister Shinzo Abe and the Bank of Japan have been pushing easy monetary policies to fight crippling deflation.
Among other major pairs, the euro EURUSD -0.03% was on par with Thursday’s level at $1.3242, and the British pound GBPUSD +0.07% was little changed from $1.5516.
The Australian dollar AUDUSD +0.13% rose to 89.42 U.S. cents from 89.29 U.S. cents.
Source: Marketwatch
