The U.S. dollar rose against a basket of currencies on Friday as the latest data on business activity around the world highlighted the U.S.’s advantage compared to other major economies. S&P Global announced that the preliminary U.S. Composite PMI Index, which tracks manufacturing and services sectors, was 50.1 in September, down from August’s final reading of 50.2. September’s results were just barely above the 50 mark, which is the dividing line between expansion and contraction.
Still, the U.S. economy so far this year has defied predictions that most economists expected it to enter a recession, triggered by the Federal Reserve’s aggressive interest rate hikes aimed at curbing inflation. The figures came on the heels of disappointing figures from Europe showing economic activity in France fell much more rapidly than expected in September.
Separate Eurozone-wide survey data showed the economy was likely to contract in the third quarter. “The U.S. continues to outperform the rest of the world and will continue to do so for some time,” Michael Brown, a market analyst at Trader
“Unless we see sustained growth in the remaining DM (developed markets), I am bearish on the medium-term amount as the focus in the FX market increasingly shifts to which central bank will spend the longest. “It’s hard to look at it at terminal rates and it takes time,” Brown said. The U.S. dollar index, a currency benchmark against six major currencies, rose 0.2% to 105.6, after rising as high as 105.78 in early trade. This puts the index on pace for a weekly gain of about 0.3%, marking its 10th consecutive week of gains and its longest winning streak in nearly a decade.
Federal Reserve President Michelle Bowman said in remarks on Friday that the U.S. central bank needs to raise interest rates further to rein in inflation in a “timely” manner, adding that the potential for energy prices He advanced a hawkish argument based on the possibility of a rise in inflation and the possibility of an inflation war. It may take years to complete. The Fed on Wednesday kept interest rates on hold at 5.25% to 5.5%, but stressed it would keep them there as long as necessary to bring inflation back to 2%.
The yen fell on Friday as the Bank of Japan kept interest rates in negative territory, days after the US Federal Reserve suggested that US borrowing costs would remain high. Pressure on the currency increased. The Bank of Japan on Friday kept interest rates unchanged at -0.1% and reiterated its promise to continue supporting the economy until it is confident that inflation will remain at its 2% target.
Bank of Japan Governor Kazuo Ueda said at a press conference, “It is not yet foreseeable that inflation will achieve the price target in a stable and sustained manner.” The yen fell to 148.42 yen to the dollar, nearing the 150 yen mark, where analysts say government intervention is likely to be used to prop up the currency. The dollar was last up 0.53% to 148.375 yen.
“I think it’s quite dovish. That’s why the yen rose above 148 yen,” said Alvin Tan, head of Asian currency strategy at RBC Capital Markets. Speculation that Tokyo may intervene to support the yen gained momentum. Japan’s Finance Minister Shunichi Suzuki said on Friday he was not ruling out any options and warned against yen selling, which would hurt the trade-dependent economy.
Meanwhile, the pound fell 0.47% to $1.2237 after data showed Britain’s economy slowed sharply in September and is likely on the brink of recession. It was close to the nearly six-month low of $1.22305 hit on Thursday, when the Bank of England (BOE) halted a long period of interest rate hikes, a day after Britain’s fast pace of price growth unexpectedly slowed.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)
