The U.S. dollar drifted lower against its major counterparts on Thursday as risk sentiment improved with markets reacting positively to the Federal Reserve’s announcement that the QE tapering could start soon given progress towards the central bank’s goals.
Unveiling its latest monetary policy on Wednesday, the Fed indicated that tapering will happen soon, but didn’t give any specific timing.
The Fed said “a moderation in the pace of asset purchases may soon be warranted” and signaled an earlier rate hike after its conclusion.
Meanwhile, the People’s Bank of China’s infusion of massive capital into the country’s banking system has eased concerns about a potential default by Evegrande.
In economic news today, a report from the Labor Department showed first-time claims for U.S. unemployment benefits unexpectedly increased for the second straight week in the week ended September 18th.
The Labor Department said initial jobless claims rose to 351,000, an increase of 16,000 from the previous week’s revised level of 335,000.
With the uptick, jobless claims climbed further off the pandemic-era low of 312,000 set in the week ended September 4th.
Economists had expected jobless claims to dip to 320,000 from the 332,000 originally reported for the previous week.
The dollar index, which dropped to 92.98, recovered some lost ground subsequently and is currently at 93.13, as against its previous close of 93.46.
Against the Euro, the dollar weakened to 1.1741 from 1.1689. Eurozone’s IHS Markit flash PMI releases for September said Manufacturing PMI slipped to 58.7 from 61.4 in the prior month, Services PMI decreased to 56.3 from 59 in August and Composite PMI dropped to 56.1 from 59.0 in August.
The Pound Sterling strengthened to $1.3719, gaining from $1.3618. The Bank of England today left rates steady at 0.1% and Quantitative Easing steady at 895 billion pounds. The BoE opined that the recent price developments appeared to have strengthened the case for a modest tightening of monetary policy.
The Yen weakened to 110.34 a dollar, drifting down from 109.81.
Against the Aussie, the dollar weakened to 0.7295 from 0.7247.
The Swiss franc firmed to 0.9246 a dollar from 0.9263. Policymakers of Swiss National Bank decided to retain the policy rate and interest on sight deposits at the SNB at -0.75%.
The Swiss central bank reiterated that it is willing to intervene in the foreign exchange market as necessary, in order to counter upward pressure on the Swiss franc. The bank repeated that the Swiss franc remains highly valued.
The Loonie gained nearly 1% against the dollar, strengthening to 1.2657 from 1.2773. Data released by Statistics Canada this morning showed retail Sales in Canada declined unexpectedly in July. The data said retail sales contracted by 0.6% on a monthly basis in July. This reading followed June’s increase of 4.2% and came in slightly better than the market expectation for a decrease of 1.2%.