The dollar index (DXY00) on Tuesday fell sharply by -0.94% and posted a 2-1/2 week low. A sharp drop in T-note yields Tuesday weakened the dollar’s interest rate differentials. Also, the strength in stocks reduced the liquidity demand for the dollar. In addition, mostly weaker-than-expected U.S. economic news Tuesday pressured the dollar.
Tuesday’s U.S. economic news was mostly bearish for the dollar. The Conference Board’s U.S. Oct consumer confidence index fell -5.3 to 102.5, weaker than expectations of 105.9. Also, the Oct Richmond Fed manufacturing survey fell -10 to a nearly 2-1/2 year low of -10, weaker than expectations of -5. The Aug S&P CoreLogic composite-20 home price index rose +13.08% y/y, weaker than expectations of +14.00% y/y and the slowest pace of increase in 1-1/2 years.
EUR/USD (^EURUSD) on Tuesday rose by +0.94% and posted a 2-1/2 week high. A weaker dollar Tuesday sparked short covering in the euro. EUR/USD also has support on expectations that the ECB will increase interest rates by +75 bp at this Thursday’s policy meeting.
Tuesday’s Eurozone economic news was bearish for EUR/USD after the German IFO Oct business climate index fell -0.1 to a 2-1/2 year low of 84.3, although that was stronger than expectations of 83.5.
USD/JPY (^USDJPY) on Tuesday fell by -0.81%. A sharp decline in T-note yields Tuesday sparked short-covering in the yen. The yen also has support from speculation Japan may continue to intervene in the currency market to support the yen. Japan has intervened in the currency market in the past two sessions to support the yen.
December gold (GCZ22) Tuesday closed up +3.90 (+0.24%), and December silver (SIZ22) closed up +0.160 (+0.83%). Gold and silver Tuesday posted moderate gains. A slump in the dollar index Tuesday to a 2-1/2 week low was supportive of metals prices. Also, lower global government bond yields Tuesday were bullish for gold prices. Gold continues to be undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/2 year low Monday.
More Forex News from Barchart
- Stocks Rally on a Sharp Decline in Bond Yields
- Dollar Slightly Lower as Stocks Rally
- Stocks Higher Ahead of Mega-Cap Tech Earnings
- Dollar Slips on Lower T-note Yields and a Stronger Yen
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