The euro and yen rallied on Thursday, reversing some recent losses against the US dollar, while the Swiss franc hit a one-month high against the euro after Swiss inflation hit its highest point. high level in 14 years.
In Asian trading, the dollar hit a three-week high against the Japanese yen after Treasury yields rose overnight. But at the opening of the European stock market, the momentum of the American currency had run out of steam. On Thursday, trading is calmer, with London markets closed for holidays.
At around 08:45, the dollar was down 0.3% against a basket of rivals, while the euro climbed 0.4% to $1.0689, after two days of losses. The yen reversed its initial weakness and settled at 129.87 yen per dollar, up slightly on the day.
This week’s stronger-than-expected data from the US reaffirmed that the US economy should hold up better than its rivals, even as the global economy slows.
“Robust U.S. data and fading hopes of the Fed easing its hike guidance were behind the U.S. dollar’s rally,” said OANDA analyst Jeffrey Halley, calling European economic data a this week of “soggy”.
But a record inflation rate in the eurozone this week is adding pressure on the European Central Bank, which meets next week for its policy meeting, to act to rein in price growth, even if it means weakening a shrinking economy.
Swiss franc hardens
The Swiss franc gained 0.3% to 1.022 francs per euro, its highest level in a month, after Swiss prices hit a 14-year high in May.
The 2.9% rate may seem modest compared to the rates of over 8% recorded in the euro zone and Great Britain, but it is remarkable for a country known for its historically low inflation and it will put the National Bank more Switzerland (SNB) under pressure to cope with rising prices.
The franc had broken parity with the euro in March, with traders betting that the ultra-dovist SNB would be forced to tighten policy and less inclined to fight against a stronger franc.
Against the dollar, the franc gained 0.5% to 0.9576, a two-day high.
Another rate hike in Canada
The Canadian dollar was little changed Thursday at C$1.2657 after the Bank of Canada on Wednesday hiked rates by 50 basis points as expected and signaled more aggressive tightening ahead. Despite Thursday’s fall, many analysts still see the US dollar outperforming, should economic data support a further rebound in US Treasury yields.
The U.S. currency’s overnight rally was led by the U.S. 10-year yield, which hit a two-week high of 2.951% on Wednesday after data showed U.S. manufacturing activity picked up in May, as demand for goods remained strong.
“It’s almost a mirror image of what we saw last week when there was talk of a possible pause in the tightening cycle,” said Ray Attrill, head of currency strategy at the National. Australia Bank.
Traders are now turning their attention to further US employment data, which will be released later on Thursday, and US payrolls figures, which will be released on Friday.
