Dollar index jumps after U.S. retail sales show surprise rebound
The dollar rose and hit its highest level in nearly three weeks against a basket of currencies on Thursday after data showed U.S. retail sales unexpectedly increased in August, easing some concerns about a sharp slowdown in economic growth.
The dollar index, which measures the U.S. currency against six others, added to gains following the report and was last up 0.5% at 92.866. It hit its highest level since Aug. 27.
“If you look at the retail sales number, it’s quite constructive even with the revisions, so we are seeing the dollar benefit from that, particularly against the funding currencies like the euro, Swiss and the yen,” said Bipan Rai, North American head of FX strategy for CIBC Capital Markets in Toronto.
The news could bolster investor expectations for next week’s Federal Reserve policy meeting and how soon the U.S central bank will start to taper stimulus.
“It feels like whatever lingering concerns there were with the underlying economy ... that was kind of washed away a little bit. So as we move towards the Fed next week, the evidence backs up the idea that we’re going to get a taper signal from the Fed at the meeting,” he said.
On Tuesday, the dollar index fell to a one-week low of 92.321 after a softer-than-expected inflation report. Its low for the month was 91.941, on Sept. 3, when payrolls data disappointed.
Investors are looking for clarity on the outlook for both tapering and interest rates at the Fed’s two-day policy meeting that ends next Wednesday.
Tapering typically lifts the dollar as it suggests the Fed is one step closer to tighter monetary policy.
It also means the central bank will be buying fewer debt assets, in effect reducing the amount of dollars in circulation, which in turn lifts the currency’s value.
The dollar also gained 0.3% to 109.70 yen, after sliding to a six-week low of 109.110 in the previous session.
The euro was 0.4% lower at $1.1766.
TREASURIES-U.S. yields rise with retail sales
The move higher on the 10-year yield, which hit a one-week peak of 1.351% earlier on Thursday, nearly offsets downward moves from earlier in the week, which came after lower inflation readings, and leaves the benchmark yield barely changed since last Friday.
The yield on 10-year Treasury notes was up 2.9 basis points at 1.333%.
Reference: CNBC, Reuters
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