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Forex: Euro hits three-week high against dollar

forexAfter weak economic data raised concerns that the Federal Reserve’s interest rate hike would be delayed, the dollar hit a three-week low against the euro and over a one-month low against the yen, while the Euro hit a three-week high against the dollar. There was also a slowing in China’s inflation, bringing it to a near five-year low.

The euro was last up 0.9% to the US dollar at $1.2773, below a three-week high that hit earlier in the session of $1.2885. The dollar was last down 0.89% to the yen at 106.09 after a more than one-month low of 105.21.

Also, the US dollar was down 0.99% against the Swiss franc at 0.9441, this after hitting a three-week low of 0.9361 during early trading. The dollar index, used to measure the US dollar against six major currencies, was last down 0.83% at 85.106.

According to data from the Commerce Department, US retail sales declined 0.3% last month while the Labor Department stated the prices received by US producers dropped 0.1% for the same time period, the first decline seen in over a year.

The New York Fed’s Empire State general business conditions index also experienced a decline to 6.17 in October, down from last month’s number of 27.54. The current report marks the weakest pace of manufacturing activity since April in the Big Apple state.

The data supported views that the Federal Reserve would delay an increase in rates from current low levels. By driving investment flows into the US, the dollar should get a boost from a rate hike increase.

Sireen Harajli, currency strategist at Mizuho Corporate Bank in New York pointed out that there is increasing concern specific to timing of the Fed’s next move based on all three key data, as well as the decline in energy prices and Treasury yields.

He added that the drop was an ideal opportunity to buy the dollar but on the view that the US economy still has the ability to outperform. Bolstering the opinion that disinflation would stop the Fed from increasing rates sooner was Brent crude that hit a four-year low of $83.37 per barrel.

Yields for US 30-year Treasuries also fell to a low of 2.673%, the lowest since third quarter 2012. Analysts believe because of weak US data, traders’ focus reverted to the United States after troubling figures from Europe and the UK weighed heavily on both the euro and sterling.

For a long time, the US had strong numbers so as Richard Franulovich, senior currency strategist at Westpac Banking Corp says, a pullback was due. Also down 1.8% was the benchmark S & P 500 stock index.

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