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Robust US data helps reverse US dollar slide

Friday, May 19, 2017 - 06:05

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The US dollar reversed early losses against a basket of major currencies on Thursday after stronger-than-expected US economic data put the focus back on a widely anticipated increase in interest rates by the Federal Reserve.

[NEW YORK] The US dollar reversed early losses against a basket of major currencies on Thursday after stronger-than-expected US economic data put the focus back on a widely anticipated increase in interest rates by the Federal Reserve.

The Swiss franc and Japanese yen, both of which are favoured as safe-haven investments during times of uncertainty, surrendered gains against the greenback after the number of Americans receiving jobless benefits fell to a 28-year low and the Philadelphia Federal Reserve's Business Index came in at double economists' expectations.

"The US economy is offering a welcome distraction to the negative news flows out of Washington," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

"The readings on jobless claims and the Philly Fed index back expectations for faster (second-quarter) growth and a Fed rate hike next month."

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Expectations for a rate increase by the Fed had eased in the wake of lacklustre data on US inflation and economic growth in recent weeks, as well as President Donald Trump's firing of FBI Director James Comey and news of possible ties between members of Mr Trump's administration and Russia.

Mr Manimbo said he expected the data could help revive investor expectations for a rate hike when the Fed meets next, on June 13-14.

The US dollar got a boost in afternoon trading from a spike higher in US Treasury yields that coincided with session highs in US stocks, which rebounded from their worst day in more than eight months.

The US dollar rose 0.65 per cent against the yen, which registered its biggest daily gain against the US dollar since July on Wednesday. The greenback earlier touched a more than three-week low against the Japanese currency.

The euro fell 0.55 per cent against the US dollar, to US$1.1095.

The Swiss franc earlier hit its strongest level against the US dollar since Mr Trump's election in November. It was last down 0.15 per cent.

The British pound fell 0.25 per cent against the US dollar, to US$1.2931, tumbling after what analysts said was likely a technical selloff. Sterling had broken through US$1.30 for the first time in nearly eight months.

The US dollar index, which tracks the greenback against six currencies, rose 0.35 per cent.

The Brazilian real fell more than 8 per cent on news that President Michel Temer was recorded discussing payments to silence testimony by a potential witness in a wide-ranging corruption probe known as Lava Jato. The US dollar was last up 6.1 per cent at 3.33 reais.

REUTERS

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