USD gains; Ignoring inflation and unemployment claims as the euro declines

USD gains;  Ignoring inflation and unemployment claims as the euro declines

A New Zealand dollar coin sits atop a US$1 bill in this illustration taken on March 11, 2016. REUTERS/David Gray/Illustration/File Photo obtains license rights

  • Euro falls after inflation data
  • The dollar is rising, but it is heading for the weakest month in a year
  • US inflation moderates in October
  • The yen comes back from the brink; The strongest month in 2023
  • End-of-month activity distorts currency market movement

NEW YORK (Reuters) – The dollar rose on Thursday as investors took profits on bets that it would weaken further and ignored data showing signs of a slowdown in the U.S. economy that suggested the Federal Reserve may finish raising interest rates.

Analysts said the euro’s weakness after the weak inflation report in the euro zone partly helped boost the US currency.

The dollar index, which measures its value against six major currencies, rose 0.5 percent to 103.38 and is on track to achieve its best daily gain in more than a month. On a monthly basis, the dollar recorded losses of 3%, on its way to its worst monthly performance in a year.

Some analysts said the dollar may have benefited from demand at the end of the month, as investors settled their positions for November, a period that saw a sharp sell-off in the US currency as the market priced in interest rate cuts next year.

But others expected a heavy sell-off in the dollar at the end of the month, given how stocks posted sharp gains in November. Analysts said that there are selling signals for the dollar in some of the largest American banks.

“We were expecting to sell dollars at the end of the month given how much U.S. stocks have risen,” said Vasiliy Serebryakov, foreign exchange strategist at UBS in New York. “That usually means foreign asset managers would have sold dollars forward.”

“But some selling likely occurred earlier in the month. So there may be less dollar selling at the end of the month.”

The dollar’s gains continued despite reports showing US inflation continued to moderate in October and jobless claims rose in the latest week, indicating a slowing labor market.

Inflation, measured by the personal consumption expenditures price index, was unchanged in October after rising 0.4% in September. In the 12 months through October, the PCE price index rose 3.0%. This was the smallest year-on-year increase since March 2021, and follows a 3.4% rise in September.

Meanwhile, initial claims for state unemployment benefits rose by 7,000 to a seasonally adjusted level of 218,000 for the week ending November 25. Economists had expected 226,000 claims.

In other currencies, the euro fell after euro zone inflation fell more than expected this month, fueling bets on early interest rate cuts from the European Central Bank.

Consumer price growth in the 20 countries that use the euro fell to 2.4% in November from 2.9% in October, well below expectations for a decline to 2.7%.

The euro was last trading at $1.0897 against the dollar, down 0.7%. It is still expected to show a monthly gain of 3%, the largest since November 2022.

Against the yen, the dollar rose 0.6 percent to 148.12 yen. In November, the dollar fell by 2.4%, on track for its largest monthly decline since December of last year.

“The broader picture is that the dollar fell significantly in November,” UBS’s Serebryakov said. “There is likely to be a two-way risk from here in relation to the Fed’s December meeting.”

He added, “US data has not slowed significantly. Inflation has slowed, but activity data is still relatively resilient.”

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Currency quote prices at 1:29 PM (1829 GMT)

(Reporting by Gertrude Chavez-Dreyfus) Editing by Emilia Sithole-Matarise and Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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