Euro’s back at $1.40 level; confusion over official dollar-yuan rate
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar pared losses against major currencies Thursday, with traders playing off an economic report showing U.S. jobless claims fell in the most recent week and awaiting data on manufacturing activity in the Philadelphia region.
The greenback had been higher in Asian trading hours following remarks by Treasury Secretary Timothy Geithner, but it fell after European economic data gave support to the euro.
The dollar index (DXY 77.13, -0.04, -0.05%) , a measure of the U.S. unit against a basket of major global currencies, fell to 77.121, down slightly from 77.147 late Wednesday. Earlier, it fell as low as 76.844.
The euro (EURUSD 1.3984, +0.0023, +0.1648%) had topped the $1.40 mark for much of the European session but lately bought $1.3991, up from $1.3955 in late North American trading Wednesday.
The single currency jumped after economic data about the private sector, with stronger-than-expected national PMI data for Germany trumping a drop for the euro-zone PMI overall, said Geoffrey Yu, strategist at UBS. Read more about the Markit preliminary composite purchasing managers’ index for the euro zone in October.
Against the Japanese yen, the dollar (USDYEN 81.1700, +0.0600, +0.0740%) traded at ¥81.22, up from ¥81.08 late Wednesday. Earlier, it rose as high as ¥81.82 due to fears that Japanese authorities could intervene again to curb the yen’s strength. See real-time currency rates and tools.
The British pound (GBPUSD 1.5758, -0.0079, -0.4988%) slipped to $1.5750 from $1.5837. The Office for National Statistics reported an unexpected 0.2% monthly drop in September retail sales.
The main focus for the currency markets has been and will continue to be whether the Federal Reserve will engage in quantitative easing and how much debt will commit to buying, analysts said.
Until then, the only impact that economic data are likely to have will likely depend on whether they change the outlook for the U.S. central bank. The drop in U.S. jobless claims reported Thursday didn’t do that. Read more about U.S. data pegging last week’s first-time filings for unemployment benefits at 452,000.
A level around 450,000 for initial jobless claims is “completely unhealthy at this stage of a recovery, further reinforcing the idea that this recovery is anemic, jobless and insufficient,” said Dan Greenhaus, chief economic strategist at Miller Tabak.
Still to come is the Philadelphia Fed’s regional manufacturing index at 10 a.m. Eastern time.
Geithner told The Wall Street Journal that major currencies are “roughly in alignment now,” a suggestion that he sees no need for the dollar to sink more than it already has against the euro and the yen. See story on Geithner.
The dollar initially recovered, but "underlying weakness remains in anticipation of [quantitative easing] expansion” when the Fed’s policy makers meet Nov. 2-3, said Adrian Schmidt, currency strategist at Lloyds TSB.
Chinese yuan, data
Also contributing to the dollar’s seesaw movements was a correction by the China Foreign Exchange System, to the parity rate at which the yuan is allowed to trade against other currencies. Read about Chinese economic data.
The yuan’s official rate was set at 6.6695 yuan to the dollar, compared with Wednesday’s parity rate of 6.6754 yuan. Earlier, the official rate had been erroneously published as 6.6495 yuan — a level that would have been a record high for the Chinese unit against the greenback.
The dollar “received an extra boost from the announcement that the [dollar/yuan] central parity was corrected to 6.6695,” said Sue Trinh, currency strategist at RBC.
The People’s Bank of China has set the parity rate at record highs against the dollar in 14 of the past 23 trading days, according to reports. Read about China’s yuan, rate hike.
