The dollar index (DXY00) Wednesday rose by +0.14% and posted a 4-week high. The dollar on Wednesday posted moderate gains and found support on the FOMC’s hawkish pause in its interest rate hiking cycle. Gains in the dollar were limited by a decline in T-note yields and weaker-than-expected U.S. ADP and ISM reports, dovish factors for Fed policy.
Wednesday’s U.S. economic news was mixed for the dollar. On the supportive side, Sep JOLTS job openings unexpectedly rose +53,000 to a 4-month high of 9.553 million, stronger than expectations of a decline to 9.400 million. Conversely, the Oct ADP employment change rose +113,000, weaker than expectations of +150,000. Also, the Oct ISM manufacturing index unexpectedly fell -2.3 to 46.7, weaker than expectations of no change at 49.0.
The FOMC voted 12-0 to keep the federal funds target range unchanged at 5.25%-5.50%. The FOMC said, "tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation." The committee added that they would take into account the cumulative tightening of monetary policy, as well as lag effects on the economy and inflation, in determining "the extent of additional policy firming that may be appropriate to return inflation to 2% over time."
Comments from Fed Chair Powell were slightly dovish when he said, "Given how far we have come, along with the uncertainties and risks we face, the FOMC is proceeding carefully."
EUR/USD (^EURUSD) on Wednesday fell by -0.17% and posted a 2-week low. A stronger dollar on Wednesday weighed on the euro. EUR/USD remained under pressure on the FOMC’s hawkish pause in its interest rate hiking cycle.
USD/JPY (^USDJPY) on Wednesday fell by -0.61%. The yen on Wednesday recovered slightly from Tuesday’s 1-year low against the dollar. The yen rallied after Masato Kanda, Japan’s top currency official, said, “We are on standby” and are ready to take necessary actions in the forex market if needed. Also, a sharp decline in T-note yields Wednesday boosted the yen. In addition, the yen found support after the 10-year JGB bond yield rose to a new 10-year high Wednesday at 0.974%.
Wednesday’s Japanese economic news was bullish for the yen after the Oct Jibun Bank manufacturing PMI was revised upward by +0.2 to 48.7 from the previously reported 48.5.
A bearish factor for the yen was Wednesday’s action by the BOJ today to announce an unscheduled bond-buying operation where it will buy 300 billion yen of 5 to 10-year debt and 100 billion yen of 3 to 5-year securities.
December gold (GCZ3) Wednesday closed down -6.80 (-0.34%), and Dec silver (SIZ23) closed down -0.162 (-0.71%). Precious metals prices on Wednesday relinquished early gains and closed moderately lower. Wednesday’s rally in the dollar index to a 4-week high undercut metals prices. Silver prices were under pressure as weaker-than-expected manufacturing news in China and the U.S. signal reduced industrial metals demand after the China Oct Caixin manufacturing PMI and U.S. Oct ISM manufacturing indexes unexpectedly declined.
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- Dollar Falls on Strength in Stocks and the Yen
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. For more information please view the Barchart Disclosure Policy here.
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