The euro stops its recent streak of losses, and the Swiss franc goes up on a rise in inflation.
London , both the euro and the yen went up against the U.S. dollar, reversing some recent losses. At the same time, the Swiss franc hit its highest level against the euro in a month after Swiss inflation hit its highest level in 14 years.
After Treasury yields went up overnight, the dollar went up against the Japanese yen to its highest level in three weeks. But by the time the markets in Europe opened, the U.S. dollar had lost its momentum. Thursday trading is less busy because London markets are closed for a holiday in the UK.
By 7:45 GMT, the dollar was down 0.3% against a group of other currencies, while the euro was up 0.4% to $1.0689. This came after two days of losses for the dollar. The yen turned around after being weak in the morning and was last worth 129.87 yen per dollar, which was a small gain for the day.
This week’s data from the U.S., which was better than expected, showed that the U.S. economy is likely to do better than its competitors even as the world economy slows.
An analyst at OANDA, Jeffrey Halley, said that the U.S. dollar’s rise was due to “strong U.S. data” and the end of hopes that the Fed would need to slow down its plans to raise interest rates. In contrast, he called this week’s economic data from Europe “soggy.”
But this week, eurozone inflation hit a record high. This puts more pressure on the European Central Bank, which has a policy meeting next week, to do something to slow price growth, even if it means hurting an economy that is already slowing.
The Swiss franc went up by 0.3% to 1.022 francs per euro, which was the highest level in a month. This came after Swiss prices rose by the most in 14 years in May.
The reading of 2.9% may not seem like much when compared to readings of 8% or higher in the eurozone and the United Kingdom, but it stands out for a country that has historically had low inflation and will put more pressure on the Swiss National Bank (SNB) to act on rising prices.
In March, the franc broke even with the euro. Traders thought that the ultra-dovish SNB would have to tighten policy and would be less likely to fight a stronger franc.
The Swiss franc rose 0.5 percent against the US dollar, reaching a two-day high of 0.9576.
Another price increase
The Canadian dollar remained stable on Thursday, valued at C $1.2657.On Wednesday, as expected, the Bank of Canada raised rates by 50 basis points and said that more aggressive tightening was on the way.
Even though the U.S. dollar fell on Thursday, many analysts still think it will do better if economic data supports a further rise in U.S. Treasury yields.
The 10-year yield in the United States hit a two-week high of 2.951 percent on Wednesday, helping the dollar rise overnight.This was because data showed that U.S. manufacturing activity picked up in May because demand for goods stayed strong.
“It’s almost a mirror image of what we saw last week when there was talk of a possible break in the tightening cycle,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank (OTC: NABZY).
Traders are now waiting for more U.S. employment data to come out later on Thursday and for the payroll numbers for the U.S. to come out on Friday.
