US Dollar firms, New Zealand’s currency rises after milder rate cut
Frankfurt (Aug 11) The U.S. dollar rose slightly on Thursday, a day after losses against major rivals, as the market adjusted to a view that the Federal Reserve could leave interest rates unchanged for the rest of the year.
The ICE U.S. Dollar Index DXY, +0.23% a measure of the dollar’s strength against a basket of six rival currencies, was up 0.3% at 95.89. The Wall Street Journal dollar index BUXX, +0.11% which measures the dollar’s strength against a broader basket of currencies than the ICE index, was up 0.1% at 86.36 after dropping earlier Thursday.
The most recent view on the potential for a U.S. interest-rate rise this year has been shaped by weak productivity data released Wednesday. That report firmed up views that the Fed could hold off on interest-rate rises in 2016 entirely. Typically, higher interest rates increase the value of the home currency as it helps attract foreign investment and increases demand for that currency.
The dollar firmed as oil prices sagged on disappointing demand data. The International Energy Agency on Thursday trimmed its forecast for the rise in global oil demand next year on a dimmer economic outlook. Meanwhile, U.S. stocks struggled with gains as oil-linked shares fell.
Against the yen, the dollar USDJPY, +0.04% inched up to ¥101.42, from ¥101.29 late Wednesday in New York. The euro EURUSD, -0.2684% dipped to $1.1145 from $1.1174 late Wednesday. A holiday in Japan on Thursday muted trading activity for the dollar.
The British pound GBPUSD, -0.2613% also slipped against its U.S. counterpart, last fetching $1.2967 compared to $1.3010 late Wednesday. The U.K. currency dipped after the Bank of England’s revival of its crisis-era bond buying program hit an unexpected snag.
Data on the U.S. calendar for Thursday includes weekly jobless claims at 8:30 a.m. Eastern Time, along with import prices for July. See Economic Calendar.
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The New Zealand dollar NZDUSD, +0.6666% briefly shot through $0.73 against the U.S. dollar after the country’s central bank cut the official interest rate to a record low of 2% and hinted that further cuts could be coming. While the interest-rate cut of 25 basis points was fully priced in, the currency rallied because some had been expecting an even bigger cut, of around 50 basis points, said Angus Nicholson, market analyst at IG, in a note.
The New Zealand dollar gave back a portion of those gains, last trading at $0.72716, which was still higher than where it was trading just ahead of that decision, around $0.720.
The Norwegian krone USDNOK, +0.0411% remained firmer, but was off its highs against the dollar on Thursday. The dollar tumbled to 8.25 kroner on Wednesday, after data showed Norway’s consumer prices rose at their fastest rate since October 2008, which firmed up bets that the country won’t be cutting interest rates anymore. The dollar was changing hands at 8.2844 kroner on Thursday.
Source: Reuters
