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Dollar trades at five-week lows ahead of US producer prices data
The dollar declined against a basket of major rivals on Friday, extending its losses for the third session and about to touch five-week lows amid a heavy selloff wave.
Now markets are waiting for important US producer prices data later today to get a better picture about the state of inflation in the US, and the future of interest rates.
The Index
The dollar index fell 0.2% to 104.30, with a session-high at 104.55.
The index closed down 0.5% on Wednesday, the second loss in a row, plumbing five-week lows at 104.08 as US treasury yields tumbled.
Weekly Trades
The index is down 0.55% this week, on track for the second weekly loss in a row.
US Yields
US 10-year treasury yields are trading near four-month lows at 4.168%, in turn pressuring the greenback.
Fed San Francisco President Mary Dale said she expects more softening in price and labor pressures, which would pave the way for rate cuts.
Chicago Fed President Austan Goolsbey said the US economy is back on the right track towards the 2% target.
Cold Inflation Data
US consumer prices rose 3% in June, the lowest pace in a year, below estimates of 3.1%.
Core prices rose 3.3% y/y in June, below estimates of 3.4%.
US Rates
Following the data, the odds of a Fed 0.25% interest rate cut in September rose to 84%, while the odds of such a cut in November rose to 93% according to the Fedwatch tool.
Yen regains footing after massive gains, potentially spurred by intervention
Yen fell in Asian trade on Friday against a basket of major rivals, after marking the biggest daily profit in two months against the dollar, with the yen now moving off three-week highs on profit-taking.
Yen is about to mark the second weekly profit in a row amid news about intervention by the Japanese authorities to support the local currency.
The Price
The USD/JPY rose 0.45% to 159.45, with a session-high at 157.74.
The yen rose 1.8% yesterday against the dollar, the first profit in four days, and the largest since early May, marking three-week highs at 157.41 amid news about an intervention by the Bank of Japan in the forex markets.
Weekly Trades
Yen is up 0.8% so far this week, on track for the second weekly profit in a row, and the largest since late April.
Intervention
Yen’s surge on Thursday is potentially due to a new round of purchases by the Bank of Japan to support the yen against main rivals.
Local TV station Asahi reported from government sources that authorities did indeed intervene to boost the yen.
However, Japanese officials refused to comment on the potential intervention, only saying they’ll continue to monitor the currency closely.
Rate Gap
Traders have mercilessly sold the yen in the past few months as Japan’s interest rates remain extremely low compared to the US and other regions, harming the yen’s positions against main rivals.
However, recent cold US inflation data boosted hopes of multiple Fed rate cuts this year, in turn weakening the greenback against a basket of major rivals, including yen.
Oil prices rebound as dollar loses ground
Oil prices rose on Thursday on track for the second profit in a row away from two-week lows, as the dollar registered heavy losses in the forex market.
Prices are also boosted by a drop in US commercial crude stocks last week, in a positive sign of demand in the US.
Prices
US crude prices rose 0.6% today to $82.83 a barrel, with a session-low at $81.95.
Brent prices rose 0.5% today to $85.85 a barrel, with a session-low at $85.05.
US crude rose 0.8% on Wednesday away from a two-week low at $80.83.
Brent rose 0.5%, snapping a wave of losses over three days, at which it plumbed July 26 lows at $84.03.
The Dollar
The dollar index fell 0.9% on Thursday, extending gains for the second day and plumbing five-week lows at 104.08 against a basket of major rivals.
A weaker dollar makes dollar-denominated commodities cheaper to holders of other currencies.
The decline came after cold US inflation data, which boosted the odds of multiple Fed rate cuts this year.
US Stocks
The Energy Information Administration reported a drawdown of 3.4 million barrels in US crude stocks last week to 445.1 million barrels, while analysts expected a buildup of 0.7 million barrels.
Gasoline stocks fell by 2 million barrels to 229.7 million barrels, while distillate stocks surged by 4.9 million barrels to 124.6 million barrels.
US Production
The EIA also reported a buildup of 100 thousand bpd last week to a total of 13.3 million bpd, the highest since February 2.
Bitcoin rushes to one-week high on hopes of US rate cuts
Bitcoin rose by over 3% on Thursday, resuming gains and scaling a week high and about to trade above $60,000 as US yields tumble.
The odds of Federal Reserve 0.25% interest rate cuts in November and September rose sharply following inflation data, which showed that inflationary pressures are fading away.
The Price
Bitcoin rose 3.15% at Bitstamp, or $1816, to $59,516, the highest since July 4.
Bitcoin lost 0.5% on Wednesday, the first loss in three days, inching closer to a five-month trough at $53,550.
Crypto Market Value
The market value of cryptocurrencies rose by over $30 billion today to $2.263 trillion, as both ethereum and bitcoin rebounded.
US Yields
US 10-year treasury yields fell by 2.3 basis points on Thursday to a four-month low at 4.183%, boosting risk appetite.
The developments came after cold US inflation data, which showed a reduction in inflationary pressures.
US Inflation
US consumer prices rose 3% in June, the lowest pace in a year, below estimates of 3.1%.
Core prices rose 3.3% y/y in June, below estimates of 3.4%.
US Rates
Following the data, the odds of a Fed 0.25% interest rate cut in September rose to 84%, while the odds of such a cut in November rose to 93% according to the Fedwatch tool.
Lower interest rates boost investments into higher risk assets, such as cryptocurrencies.