The dollar index (DXY00) on Tuesday fell by -0.14%. The dollar was undercut Tuesday as the Chinese yuan rallied to a 1-1/2 week high after China eased travel restrictions. However, losses in the dollar were limited due to higher T-note yields and stock market losses.
Tuesday’s U.S. economic news was mostly bearish for the dollar. Nov wholesale inventories rose +1.0% m/m, above expectations of +0.3% m/m. Also, Nov retail inventories unexpectedly rose +0.1% m/m, above expectations for a -0.1% m/m decline. In addition, the Dec Dallas Fed manufacturing outlook level of general business activity unexpectedly fell -4.4 to -18.8, weaker than expectations of an increase to -13.5. Finally, the Oct S&P CoreLogic composite-20 home price index rose +8.64% y/y, the smallest pace of increase in 2 years but still stronger than expectations of +8.00% y/y.
EUR/USD (^EURUSD) on Tuesday rose by +0.05%. The euro Tuesday climbed to a 1-1/2 week high on hawkish ECB comments that pushed the 10-year German bund yield up to an 11-year high of 2.534%, strengthening the euro’s interest rate differentials. Gains in the euro were limited after ECB Vice President Guindos undercut the euro when he said the Eurozone faces a "very difficult economic situation.”
ECB Governing Council member Knot said he sees "quite a decent pace of tightening" through 50 bp rate hikes in the next several months before borrowing costs eventually peak by next summer.
ECB Vice President Guindos said the Eurozone faces a "very difficult economic situation as high inflation rates that we are seeing across Europe are coinciding with an economic slowdown and lower growth.”
USD/JPY (^USDJPY) rose by +0.49%. A jump in the 10-year T-note yield Tuesday to a 6-week high weighed on the yen. Also, weaker-than-expected Japanese economic news pressured the yen after Japan Nov retail sales unexpectedly declined by the most in 5 months.
Japan Nov retail sales unexpectedly fell -1.1% m/m, weaker than expectations of +0.2% m/m and the biggest decline in 5 months.
February gold (GCG3) on Tuesday closed up +18.90 (+1.05%), and March silver (SIH23) closed up +0.297 (+1.24%). Precious metals Tuesday rallied moderately on speculation the reopening of China’s economy will boost global economic growth and inflation. A slump in stocks Tuesday also boosted the safe-haven demand for precious metals. However, higher global government bond yields Tuesday limited gains in gold.
More Forex News from Barchart
- Higher Bond Yields Weigh on Tech Stocks
- The Dollar Index Corrects
- Dollar Slightly Lower as U.S. Inflation Outlook Improves
- Stocks Stabilize after Positive U.S. Inflation News
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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