FOREX-Robust U.S. economy lifts dollar, yen skids to 10-month low

By Joice Alves and Rae Wee

LONDON/SINGAPORE, Sept 7 (Reuters) – The dollar edged up after pushing the yen to a 10-month trough on Thursday and kept the euro and sterling pinned near three-month lows, as investors placed their hopes on a still-resilient U.S. economy.

Against a basket of currencies including the euro and sterling, the dollar rose 0.05% to 104.91, holding on to some of its gains from the previous session after scaling a six-month peak as the U.S. services sector unexpectedly gained steam in August.

The greenback scaled a fresh top of 147.875 yen in early Asia trade, its highest since last November.

“Stronger-than-expected ISM services reaffirmed the U.S. outperformance narrative, adding broad support to the U.S. dollar,” said Kirstine Kundby-Nielsen, analyst at Danske Bank.

The Federal Reserve report known as the “Beige Book”, published on Wednesday, showed that the U.S. economic growth was modest in recent weeks, job growth was subdued, and inflation slowed in most parts of the country.

Market pricing shows a more than 40% chance that the Fed will deliver another rate hike in November, according to the CME FedWatch tool, though expectations are for policymakers to keep rates on hold later this month.

A lower-than-expected fall in China’s exports and imports numbers in August did little to lift investors’ spirits, as they remain on the lookout for further support measures from Beijing to shore up the economy and revive market confidence.

“I think that what’s really driving the dollar is not so much that the U.S. economy is doing great, but it’s doing better than elsewhere,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia.

The onshore yuan slid to a fresh 10-month low of 7.3270 per dollar, not far from hitting a 16-year low.

The Australian dollar was about flat at $0.6386, while the New Zealand dollar was up 0.2% at $0.5881, with both languishing near their recent 10-month lows.

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The two antipodean currencies are often used as liquid proxies for the Chinese yuan.

“I think we’re all fatigued over the weak China-data theme,” said Matt Simpson, senior market analyst at City Index.

The China-sensitive euro was last 0.1% lower at $1.0715, after having fallen to its lowest since June on Wednesday. Sterling slipped 0.3% to $1.2472, touching a three-month trough.

Bank of England (BoE) Governor Andrew Bailey said on Wednesday that the central bank was “much nearer” to the end of its rate-hike cycle, though borrowing costs might still have further to rise because of stubborn inflation pressures.

On the same day, European Central Bank (ECB) policymakers warned investors that the decision for a rate increase next week was still up in the air, but a rise in borrowing costs was among the options on the table.

In Japan, traders continued to be on intervention watch as a fragile yen struggled to make headway against a resilient dollar, even as officials stepped up their warnings against a sell-off in the currency.

The yen edged 0.2% higher to 147.45 per dollar.

(Reporting by Joice Alves in London and Rae Wee in Singapore; Editing by Sharon Singleton)