By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The dollar gained on Thursday after earlier pushing the yen to a 10-month low and driving the euro and sterling to their weakest levels in three months, bolstered by a still-resilient U.S. economy that has defied expectations despite aggressive tightening by the Federal Reserve.
China’s onshore yuan, on the other hand, slid to a 16-year low versus the greenback, under pressure from a property slump, weak consumer spending, and shrinking credit growth in the world’s second-largest economy.
Against a basket of currencies including the euro and sterling, the dollar rose 0.2% to 105.03, after earlier touching a fresh six-month peak. The index also climbed to a six-month high on Tuesday, as the U.S. services sector unexpectedly gained steam in August.
More data on Thursday further pointed to an overall tenacious U.S. economy.
“It’s all about U.S. outperformance relative to the rest of the world economically,” said Brad Bechtel, global head of foreign exchange at Jefferies in New York.
“The fundamental story in the U.S. is still a bit stronger than the rest of the world. That continues to be a huge catalyst for dollar strength.”
Data showed that initial claims for state unemployment benefits fell unexpectedly to 216,000 in the week ended Sept. 2 from a revised 229,000 the week before. The latest week’s numbers were the lowest since February. Economists polled by Reuters had forecast new claims would rise to 234,000 in the latest week.
A separate report showed worker productivity in the second quarter was not as strong as initially reported, but still remained solid.
Nonfarm productivity – measuring hourly output per worker – increased at a 3.5% annualized rate in the period from April through June — the highest since the third quarter of 2020 — after falling 1.2% in the first three months of the year. Second-quarter productivity growth had initially been estimated at 3.7%.
Market pricing shows a more than 40% chance the Fed will deliver another rate hike in November, according to the CME FedWatch tool, though expectations are for policymakers to keep rates on hold later this month.
ONSHORE YUAN HITS 2007 LEVELS
The onshore yuan sank to 7.3299 per dollar, its weakest since December 2007. It was last at 7.3297 per dollar, down 0.2%.
China launched a series of policy measures in recent months to revive a stumbling economy after its post-pandemic recovery faltered. Investors remain on the lookout for further support measures from Beijing to revive market confidence.
The Australian dollar was down 0.1% at US$0.6379, while the New Zealand dollar rose 0.2% to US$0.5870, with both languishing near their recent 10-month lows.
The two antipodean currencies are often used as liquid proxies for the Chinese yuan.
The China-sensitive euro was last 0.3% lower at $1.0696, after having fallen to its lowest since June on Wednesday.
European Central Bank (ECB) policymakers warned investors that the decision for a rate increase next week was still up in the air, but a hike was among the options on the table.
In Japan, traders continued to be on intervention watch as the yen struggled to make sustained headway against a resilient dollar, even as officials stepped up their warnings against further pushing the Japanese unit lower.
The greenback scaled a fresh top of 147.875 yen earlier, its highest since November, and was last down 0.4% at 147.20.
Elsewhere, sterling fell 0.3% to $1.2470, touching a three-month trough.
Bank of England (BoE) Governor Andrew Bailey said on Wednesday the central bank was “much nearer” to the end of its rate-hike cycle, though borrowing costs might still have further to rise because of stubborn inflation pressures.
Currency bid prices at 3:24PM (1924 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Dollar index 105.0500 104.8600 +0.19% 1.507% +105.1500 +104.8000
Euro/Dollar $1.0696 $1.0727 -0.28% -0.18% +$1.0731 +$1.0686
Dollar/Yen 147.2250 147.7100 -0.34% +12.28% +147.8700 +147.0500
Euro/Yen 157.46 158.38 -0.58% +12.23% +158.5200 +157.3700
Dollar/Swiss 0.8930 0.8911 +0.22% -3.42% +0.8940 +0.8909
Sterling/Dollar $1.2470 $1.2507 -0.30% +3.11% +$1.2508 +$1.2445
Dollar/Canadian 1.3681 1.3635 +0.34% +0.98% +1.3694 +1.3633
Aussie/Dollar $0.6379 $0.6383 -0.05% -6.41% +$0.6395 +$0.6363
Euro/Swiss 0.9551 0.9558 -0.07% -3.48% +0.9563 +0.9549
Euro/Sterling 0.8577 0.8576 +0.01% -3.02% +0.8601 +0.8573
NZ $0.5880 $0.5870 +0.19% -7.39% +$0.5894 +$0.5863
Dollar/Norway 10.7070 10.7180 +0.00% +9.21% +10.7410 +10.7000
Euro/Norway 11.4487 11.4880 -0.34% +9.15% +11.5130 +11.4460
Dollar/Sweden 11.1460 11.1037 +0.00% +7.09% +11.1667 +11.0895
Euro/Sweden 11.9169 11.9164 +0.00% +6.88% +11.9395 +11.8976
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Joice Alves in London, Rae Wee and Winni Zhou; Editing by Sharon Singleton, Chizu Nomiyama, Nick Zieminski and Andrea Ricci)