The dollar index (DXY00) on Wednesday rose by +0.29%. The dollar Wednesday posted moderate gains as higher T-note yields supported the dollar. Also, a slump in stocks Wednesday boosted the liquidity demand for the dollar.
Wednesday’s U.S. economic news was mixed for the dollar. On the bullish side, the Dec Richmond Fed manufacturing index unexpectedly rose +10 to an 8-month high of 1, stronger than expectations of a decline to -10. Conversely, Nov pending home sales fell -4.0% m/m, weaker than expectations of -1.0% m/m.
EUR/USD (^EURUSD) on Wednesday fell by -0.24%. The euro Wednesday fell back from a 1-1/2 week high and posted mild losses. A stronger dollar Wednesday sparked long liquidation in the euro. EUR/USD Wednesday initially moved higher on hawkish comments from ECG Governing Council member Simkus who said the inflation peak in the Eurozone is still to come.
USD/JPY (^USDJPY) on Wednesday rose by +0.68%. The yen Wednesday dropped to a 1-week low against the dollar as higher T-note yields undercut the dollar. The yen was also under pressure after the BOJ boosted QE with additional bond purchases. In addition, the minutes of the BOJ's Dec 19-20 policy meeting released Wednesday signaled support for the BOJ to continue with monetary easing.
Japan Nov industrial production fell -0.1% m/m, stronger than expectations of -0.2% m/m.
The BOJ Wednesday boosted QE after it unexpectedly announced it would buy unlimited amounts of 2-year notes at a fixed yield of 0.03% and 5-year notes at 0.24%, among other purchases of 1-to-10-year securities for a total of 500 billion yen.
The summary of opinions from the BOJ's Dec 19-20 policy meeting said the BOJ's view that the decision to widen the trading band for the 10-year bond yield wasn't aimed at changing the trajectory of monetary policy.
February gold (GCG3) on Wednesday closed down -7.30 (-0.40%), and March silver (SIH23) closed down -0.377 (-1.56%). Precious metals Wednesday posted moderate losses on a stronger dollar and higher bond yields after the 10-year T-note yield climbed to a 6-week high. However, a positive factor for metals Wednesday was a slump in stocks that boosted the safe-haven demand for precious metals.
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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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