November 9, 2018 / 7:58 PM / 13 days ago

FOREX-Strong U.S. economy, weaker stocks boost dollar

    * GRAPHIC-World FX rates in 2018: tmsnrt.rs/2egbfVh

 (Recasts; updates rates, adds analyst quote)
    By Kate Duguid
    NEW YORK, Nov 9 (Reuters) - The U.S. dollar rose toward a
16-month high against the euro on Friday as falling equity
prices spurred a flight to quality and the U.S. Federal Reserve
reaffirmed its monetary tightening stance, citing the strong
U.S. economy.
    The S&P 500        fell more than 1 percent, with shares of
large technology, industrial and material companies taking a hit
as weak Chinese data and a slide in oil prices raised concerns
about global growth.             
    Against the backdrop of a multi-billion dollar trade dispute
between Washington and Beijing, Chinese data showed producer
inflation fell for the fourth straight month in October on
cooling domestic demand and manufacturing activity, while car
sales fell for a fourth consecutive month.             
            
    "(Chinese officials) look distressed - they don't have the
kind of control we're used to assuming authorities driving an
economy at 6-7 percent a year do. That's putting pressure on the
Aussie, Kiwi and feeding into a strong dollar and yen," said
David Gilmore, partner at FX Analytics. 
    Equities also fell after the Fed on Thursday reaffirmed its
plans to hike interest rates in December and beyond.
    The greenback had fallen broadly following U.S.
congressional elections on Tuesday on expectations that the
outcome would make further fiscal stimulus measures unlikely.
But the currency bounced back, and on Friday returned to
outperforming most major currencies, underpinned by the robust
U.S. economy and rising interest rates.
    "We're wary of selling the dollar too soon, because the Fed
is still hiking rates into a tightening labor market and trade
tensions haven't gone away," said Kit Juckes, chief FX
Strategist at Societe Generale. 
    The dollar has benefited as rising U.S.-China trade tensions
boosted demand for safe-haven investments, pushing the offshore
Chinese yuan toward 7 per dollar        and the euro toward
$1.13       .
    In Japan, where interest rates are expected to stay
extremely low, the yen        is near a five-week low against
the dollar, last at 113.75 yen, and has fallen 1.6 percent over
the last 10 trading sessions.
    The dollar index       , which tracks the currency against
six major peers, traded as high as 97.01 on Friday, not far from
a 16-month peak of 97.2 touched on Oct. 31.
    The euro        last traded at $1.133, down 0.26 percent.
    Sterling extended its losses on Friday after Jo Johnson, a
junior transport minister, resigned from UK Prime Minister
Theresa May's government, citing her "delusional" Brexit plans,
and called for another referendum on Britain's EU membership.
The currency was down 0.54 percent at $1.297        from around
$1.304 before the announcement from Johnson.             
    On Friday afternoon the Mexican peso        strengthened by
0.3 percent to 20.13 versus the dollar after the country's
President-elect, Lopez Obrador, said he would make no changes to
the legal framework of the financial sector.             

 (Reporting by Kate Duguid and Tom Finn; Editing by Richard
Chang)
  
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