Dollar Declines on Lower T-Note Yields

The dollar index (DXY00) on Thursday fell by -0.73%.  Lower T-note yields Thursday weakened the dollar’s interest rate differentials and weighed on the dollar.  Also, long liquidation pressures undercut the dollar ahead of Friday’s U.S. monthly payroll report. 

U.S. economic data Thursday was mixed for the dollar.  On the negative side, weekly initial unemployment claims rose +6,00 to 260,000, right on expectations.  Conversely, the June trade deficit of -$79.6 billion was slightly narrower than expectations of -$80.0 billion.

Thursday’s comments from Cleveland Fed President Mester were hawkish for Fed policy and supportive of the dollar when she said she has yet to evaluate what she sees as an appropriate path for interest rates come the September FOMC meeting, but it's "not unreasonable" to maintain increases until they get to "a little above 4%."

EUR/USD (^EURUSD) on Thursday rose by +0.0086 (+0.85%).  Hawkish comments Thursday from ECB Governing Council member Kazaks sparked short-covering in the euro when he said the ECB should continue raising interest rates to prevent high inflation from taking root.

Thursday’s Eurozone economic data was mixed for EUR/USD.  On the positive side, German June factory orders fell -0.4% m/m, stronger than expectations of -0.9% m/m.  Conversely, the German July S&P Global construction PMI fell -2.2 to 43.7, the steepest pace of contraction in 17 months.

USD/JPY (^USDJPY) on Thursday fell by -0.69%.  A fall in T-note yields Thursday supported moderate gains in the yen.  Also, ramped-up China tensions boosted some safe-haven demand for the yen after Kyodo News reported Thursday that five missiles fired by China in its live testing military drills went over Taiwan and landed inside Japan’s exclusive economic zone.  In addition, China said Thursday it canceled a meeting between Foreign Minister Wang Yi and his Japanese counterpart over a G-7 statement expressing concern about China’s “threatening actions” around Taiwan. 

October gold (GCV22) Thursday rose by +30.10 (+1.70%), and September silver (SIU22) rose by +0.228 (+1.15%).  Precious metals Thursday rallied moderately, with gold climbing to a 1-month high.  A weaker dollar Thursday was supportive of precious metals.   Also, lower global T-note yields Thursday helped to push gold prices higher.  Finally, ramped-up China-Taiwan tensions have sparked some safe-haven buying of precious metals after China Thursday fired 11 missiles near Taiwan as a result of House Speaker Pelosi’s visit to Taiwan.

• Stocks Slip on Growth Concerns as BOE Warns of Recession
• Dollar Rises on Strong U.S. Data and Hawkish Fed Comments
• Stocks Rally on Strong Economic Data and Easing Taiwan Tensions
• Dollar Rallies on Hawkish Fed Comments