The US Dollar Gains Despite Signs of a Slowing Economy
Strong Dollar Fueled by Month-End Buying
The dollar surged on Thursday, driven by month-end buying, even as data pointed to a weakening U.S. economy. This suggested that the Federal Reserve might halt interest rate hikes and potentially start easing by mid-next year.
Dollar Index Surges
The dollar index, which measures the dollar against six major currencies, rose by 0.5% to 103.38. This marked its strongest daily gain in over a month, highlighting the currency’s resilience amidst economic uncertainties.
Dollar Benefits from Month-End Demand
Analysts attributed the dollar’s gains to month-end demand as investors adjusted their positions for November. The period saw a sharp decline in the U.S. currency, with the market anticipating rate cuts in the coming year.
Data Shows Slowing U.S. Economy
Despite the dollar’s robust performance, reports indicated a moderation in U.S. inflation in October and an increase in jobless claims, signaling a slowdown in the labor market.
Deceleration in Inflation
The Personal Consumption Expenditures (PCE) price index remained unchanged in October, following a 0.4% increase in September. The year-on-year gain of 3.0% was the smallest since March 2021, reflecting a slowdown in inflation.
Impact on Fed’s Policy
According to Jamie Cox, managing partner at Harris Financial Group, the data suggests a significant deceleration in inflation, marking the end of the rate cycle. This could influence the Federal Reserve’s hawkish stance in the coming months.
Unemployment Claims Rise
Initial claims for state unemployment benefits rose by 7,000 to a seasonally-adjusted 218,000 for the week ending Nov. 25. This increase further underscored the challenges facing the U.S. labor market.
Currency bid prices at 9:28AM (1428 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
- Dollar index: 103.3500 102.8200 +0.54% -0.135% +103.4500 +102.7100
- Euro/Dollar: $1.0917 $1.0969 -0.48% +1.88% +$1.0984 +$1.0908
- Dollar/Yen: 148.1000 147.2400 +0.60% +12.98% +148.2400 +146.8500
- … (continued for other currency pairs)
Foreign Exchange Market Update
The foreign exchange market at 9:28AM (1428 GMT) showed fluctuations in currency bid prices, reflecting the dynamic nature of global exchange rates. The data provides insights into the performance of major currency pairs in the market.