After a jittery week for the dollar, it has managed to stabilize against most of its major peers today, especially against the yen. The Japanese currency halted its rally after gaining over 3% this week against the greenback on safe haven demand.
But the yen pared gains on speculation the Bank of Japan might intervene in the currency markets to halt the appreciation of the currency after both Bank of Japan Governor Haruhiko Kuroda and Finance Minister Taro Aso said today that they are watching moves in exchange rates.
The dollar fell to lows not seen since 2014 on Thursday, below 111 yen but recovered back up to the 112 yen handle today. The pair got a brief boost above 113 yen after US retail sales figures came in better-than-expected for January. Retail sales rose for a third straight month by 0.2% versus a 0.1% gain expected. Adding to the upbeat January figure, the December figure was revised up to show a 0.2% gain from a previously reported 0.1% fall.
The dollar’s gains were trimmed after the preliminary reading of the University of Michigan consumer sentiment survey for February. The index fell to a four month low after due to the effect of lower stock prices on sentiment, pushing the index to 90.7, below January’s revised 92.0 reading.
The US 10-year Treasury yield moved off a three-year low that was reached yesterday and equity markets steadied in Europe and the US today.
Crude oil prices bounced higher today above $28 a barrel after tumbling sub-$27 to 12-year lows yesterday.
European session data today showed Eurozone GDP rose 0.3% in the fourth quarter, as expected, while industrial production fell 0.1% versus a forecast of a 0.3% rise. Greece’s GDP fell 0.6% in the fourth quarter to put the economy back in recession.
The Eurozone GDP data did not have much impact on the euro as the currency was most likely driven lower by a decline in risk aversion as equity markets recovered today. Consequently, the EUR/USD pair fell back below the key $1.1300 level to as low as $1.1230.
Sterling outperformed against the dollar in early European session trading to rise above $1.4500 but reversed backed down after reaching a high of $1.4570.
The pound ignored UK data today which showed construction output rose 1.5% in December, slightly below expectations of a 2% gain. November’s data was revised lower to –1.1% from –0.5% month-on-month.
Investors look to the return of Chinese markets on Monday as they have been closed all week for the Lunar New Year holidays. Meanwhile the US and Canada will be closed on Monday.
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