Dollar Falls Back from 20-Year High as T-Note Yields Fall

The dollar index (DXY00) on Friday fell -0.14% and eased from Thursday’s 20-year high.

A dovish U.S. unemployment report pushed T-note yields lower and sparked long liquidation pressure in the dollar.  U.S. Aug payrolls rose by +315,000, which showed a mildly stronger labor market than expectations of +298,000.  However, the Aug unemployment rate rose by +0.2 points to 3.7% due to people coming back into the labor market, which reduces some of the pressure on the Fed to raise interest rates.

The dollar partially recovered from early lows as the stock market fell and sparked some liquidity demand for the dollar.

EUR/USD (^EURUSD) rose slightly by +0.05%.  Weakness in the dollar sparked some short covering in EUR/USD. Also, European energy crisis concerns eased and gave the euro a boost after European nat-gas prices plunged -11% today to a 3-week low. 

Eurozone economic news was bearish for EUR/USD.  German July exports fell -2.1% m/m, the biggest decline in 4 months.  Also, German July imports fell -1.5% m/m, the biggest decline in 6 months.  The Eurozone July PPI rose a record +37.9% y/y, stronger than expectations of +37.3% y/y.

USD/JPY (^USDJPY) Friday was little changed.  The yen recovered from an early 24-year low on jawboning from Japanese Finance Minister Suzuki, who said sudden moves in the yen are not desirable and that the currency market needs to be closely monitored. 

October gold (GCV22) on Friday closed up +13.40 (+0.79%), and September silver (SIU22) closed up +0.225 (+1.28%).  Precious metals saw support Friday from a weaker dollar and from increased safe-haven demand with the sharp sell-off in U.S. stocks.  Also, Friday’s dovish U.S. unemployment report was bullish for gold as it eases pressure on the Fed to aggressively tighten monetary policy.  Gold prices continued to be undercut by long liquidation pressure after long gold positions in ETFs fell to a 6-1/2 month low Thursday.

• Stocks Climb and T-Note Yields Fall on Fed-Friendly Payroll Report
• Dollar Rallies to a 20-Year High as T-Note Yields Climb
• Growth Concerns and Rising Bond Yields Hammer Stocks
• Dollar Slightly Lower on Weak U.S. Labor News