Updates prices, market activity, adds comment
Dollar index on track for biggest one-day gain since June
Euro drops more than 1% against dollar
British pound drops 0.7% to $1.3698
Moves reverse Thursday action
End-of-month position changes a factor
Markets juggle views of central bank rate moves
By David Henry
NEW YORK Oct 29 (Reuters) – The dollar index continued to rebound from prior-day losses on Friday after U.S. government bond yields rose on news that the Federal Reserve’s preferred inflation measure showed prices continuing to rise faster than its 2% target.
The euro, which has a heavy weighting in the dollar index, plunged 1.05% against the greenback – the most since at least June.
The euro’s drop helped drive the dollar index =USD up 0.8% to 94.102 in the afternoon in New York (1820 GMT).
The fall in the euro more than reversed its big gain the day before and came as traders tried to sort through inflation reports and central bank comments to divine the course of interest rates for different currencies.
The euro also fell against the British pound by 0.4% and the Swiss franc by 0.7%.
Volatility in the foreign exchange and interest rate markets has increased throughout the week around central bank actions and economic data. Next week could bring more of the same around policy meetings of the U.S. 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.
Another reason for the volatility, Chandler and others said, was month-end portfolio repositioning on the day of the week when markets tend to be the least liquid.
“It is the end of the month and it is Friday,” said Axel Merk, chief investment officer at Merk Investments in Palo Alto. Some of the trades were likely “window-dressing” so that month-end portfolios would not show so much leverage, he said.
U.S. Treasury yields rose after the government’s index of core personal consumption expenditures – the Fed’s preferred inflation measure – climbed at a 4.4% annual rate in September, continuing a run of inflation at levels not seen in 30 years.
U.S. 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 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 British pound fell 0.7% to $1.3698 GBP=D3.
The dollar gained 0.3% against the Japanese yen to 113.92505. EURJPY=
The Australian dollar AUD=D3 slipped 0.3% to $0.7521.
In cryptocurrencies, ether ETH=BTSP rose to a record $4,460 and was up 3% on the day, while bigger rival bitcoin BTC=BTSP gained 3% to $62,330.
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Currency bid prices at 2:20PM (1820 GMT)
Description
RIC
Last
U.S. Close Previous Session
Pct Change
YTD Pct Change
High Bid
Low Bid
Dollar index
=USD
94.1020
93.3620
+0.81%
4.580%
+94.3020
+93.3200
Euro/Dollar
EUR=EBS
$1.1560
$1.1683
-1.05%
-5.39%
+$1.1690
+$1.1535
Dollar/Yen
JPY=EBS
113.9250
113.5600
+0.32%
+10.26%
+114.0950
+113.3950
Euro/Yen
EURJPY=
131.69
132.69
-0.75%
+3.76%
+132.9100
+131.6200
Dollar/Swiss
CHF=EBS
0.9154
0.9120
+0.41%
+3.50%
+0.9176
+0.9103
Sterling/Dollar
GBP=D3
$1.3698
$1.3795
-0.70%
+0.27%
+$1.3804
+$1.3669
Dollar/Canadian
CAD=D3
1.2372
1.2342
+0.24%
-2.84%
+1.2407
+1.2328
Aussie/Dollar
AUD=D3
$0.7521
$0.7545
-0.33%
-2.24%
+$0.7555
+$0.7501
Euro/Swiss
EURCHF=
1.0582
1.0652
-0.66%
-2.08%
+1.0655
+1.0571
Euro/Sterling
EURGBP=
0.8437
0.8472
-0.41%
-5.59%
+0.8473
+0.8434
NZ Dollar/Dollar
NZD=D3
$0.7163
$0.7205
-0.62%
-0.29%
+$0.7201
+$0.7137
Dollar/Norway
NOK=D3
8.4435
8.3295
+1.46%
-1.58%
+8.4660
+8.3410
Euro/Norway
EURNOK=
9.7608
9.7373
+0.24%
-6.75%
+9.7951
+9.7285
Dollar/Sweden
SEK=
8.5907
8.5082
-0.13%
+4.81%
+8.6036
+8.5073
Euro/Sweden
EURSEK=
9.9309
9.9439
-0.13%
-1.44%
+9.9624
+9.9247
World FX rateshttps://tmsnrt.rs/2RBWI5E
(Reporting by David Henry in New York and Saikat Chatterjee in London. Editing by Angus MacSwan, Raissa Kasolowsky and Kirsten Donovan)
(([email protected]; +1-332-219-1974; Reuters Messaging: [email protected]))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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