The U.S. dollar turned upward against major currencies for the first time this week as U.S. yields held steady, Japan’s economic outlook worsened and the Reserve Bank of New Zealand surprised markets by hinting at a higher interest rates.
The dollar index rose as much as 0.4% and crossed above 90 on Wednesday afternoon in New York, but still remained near January lows as the market tapped the brakes on its steady slide since March.
Benchmark yields on 10-year U.S. Treasuries stayed within their range from the day before and were edging up higher at 1.58% after an auction of 5-year notes.
The foreign exchange markets are wary of taking trends too far right now because key U.S. economic data is coming out on Thursday and Friday, said Joe Manimbo, senior market analyst at Western Union Business Solutions.
Most important is Friday’s release of an inflation measure watched closely by the U.S. Federal Reserve. If it is stronger than expected, yields could rise and power the dollar higher. If weaker, the Fed’s low interest rate outlook could continue and the dollar’s downtrend could resume.
“Caution ahead of the event risk in the latter part of the week is helping to put a tentative floor under the dollar,” Manimbo said.
Since March the dollar index has lost more than 3% as many other economies have begun to catch up with the pace of U.S. coronavirus vaccinations and as their interest rates have shown more promise of rising.
Against the Japanese yen on Wednesday, the dollar gained as much as 0.3% and topped 109 yen.
The Japanese government slashed its economic outlook for the first time in three months, citing new weakness in private consumption and business conditions because of coronavirus emergency measures.
The yen is likely to underperform as Japan’s economic outlook worsens, according to Win Thin, global head of currency strategy at Brown Brothers Harriman.
Yen weakness could offset the currency’s usual appeal as a safe haven.
After the New Zealand central bank hinted at a possible interest rate hike by September of next year, the kiwi rose more than 1% against the U.S. dollar
The RBNZ is the second major central bank after the Bank of Canada to nod toward pulling back on easy money policies.
The change drove up New Zealand government 10-year yields and reminded traders to anticipate shifts in tone from other monetary authorities, despite further insistence from policymakers at the U.S. Federal Reserve that it is too early to discuss tightening.
“There are now several central banks that appear to be closer to a tightening cycle than the Federal Reserve, and markets are sensing that,” said Imre Speizer, Westpac’s head of New Zealand strategy.
Currencies of New Zealand, Canada and Norway are driven by expectations of central bank policy, Speizer said.
The dollar’s rise came at the expense of the euro and the Canadian dollar. The euro lost 0.5% to the dollar as euro zone yields fell on new dovish signals from the European Central Bank. At $1.2187 the euro was still up 4% since March, however.
The U.S. dollar appreciated to 1.2118 Canadian dollars from 1.2062 on Tuesday.
China’s onshore and offshore yuan strengthened to three-year highs versus the dollar. The onshore currency broke through 6.40 – a key psychological level – to trade at 6.39 <CNY=CFXS>.
A day earlier, major Chinese state-owned banks had bought dollars at that level in a move viewed as an attempt to cool the rally, sources said.
Cryptocurrencies bitcoin and ether were up a fraction of 1% and steady after a volatile weekend.
Iran has banned the energy-intensive mining of cryptocurrencies such as bitcoin for nearly four months, as the country faces major power blackouts in many cities.
(Reporting by David Henry in New York, Elizabeth Howcroft in London and Kevin Buckland in Tokyo; editing by Mark Heinrich)
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
