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US dollar slips after November's gains; sterling strengthens

Friday, December 2, 2016 - 06:16
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The US dollar fell on Thursday against a basket of currencies as traders booked gains following a solid November on bets of a stronger US economy under a Trump administration and on caution ahead of Friday's government payrolls report.

[NEW YORK] The US dollar fell on Thursday against a basket of currencies as traders booked gains following a solid November on bets of a stronger US economy under a Trump administration and on caution ahead of Friday's government payrolls report.

The greenback weakened against sterling on a perceived crack in Britain's "hard Brexit" line on leaving the European Union after Brexit minister David Davis said Britain would consider paying into the EU budget for market access.

The pound rose as much as about 1.6 per cent to a three-week high against the US dollar of US$1.2696. It was last up 0.5 per cent at US$1.2575.

"The US dollar is trading heavily against most of the major currencies, but the general tone appears consolidative in nature," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman, in a research note.

The US dollar index, which measures the greenback versus a basket of six currencies, fell 0.4 per cent to 101.06. It reached a 13-1/2-year peak of 102.05 last week, and for the month of November it gained 3.1 per cent.

The greenback pulled back from an earlier nine-month peak against the yen, at 114.82, before falling 0.4 per cent to 114.03 yen in late trading.

The US dollar's wobbly start in December reflected higher US Treasury yields following upbeat data on manufacturing and construction spending.

Investors are waiting to see whether the government's jobs report for November, due at 8:30am (1330 GMT) on Friday, will support the view of faster US growth, which could stoke further gains for the US dollar.

The euro strengthened after Reuters reported the European Central Bank will extend its bond purchases beyond next March and consider sending a formal signal next week that the asset purchase program will eventually end.

Prolonging the ECB's quantitative easing was not unexpected as European growth remains sluggish, but even a token gesture that QE would end is positive for the euro.

"When you think the potential that the QE gravy train is not indefinite, that would cause upward pressure on the euro," said Jennifer Vail, head of fixed income research at US Bank Wealth Management in Portland, Oregon.

The euro was boosted further after French President Francois Hollande said he will not seek a second term, a move seen paving an easier path for conservative Francois Fillon to defeat Marine Le Pen, head of the National Front party, in 2017.

The euro was up 0.6 per cent at US$1.0649 and up 0.2 per cent against the yen, at 121.38 yen.

REUTERS