Currencies: Dollar on pace for 4th straight loss

The U.S. dollar was on course for a fourth-straight losing session on Thursday, weakening even as recent data mostly underlined strength in the domestic economy.

How currencies are moving?

The ICE U.S. Dollar Index DXY, -0.27% a measure of the currency against six main rivals, fell 0.4% to 88.789. The broader WSJ U.S. Dollar Index BUXX, -0.33% was down 0.3% at 82.88.

The greenback declined further against the Japanese yen USDJPY, -0.72% USDJPY, -0.72% trading at ¥106.40, compared with ¥107.01 late Wednesday in New York. Earlier on, the pair hit a new 15-month low at ¥106.18. The yen began its steady climb in the wake of last week’s meltdown in global equity markets. The yen is considered a haven in times of economic and financial upheaval.

Versus the Swiss franc USDCHF, -0.6348% also a haven asset, the dollar fell to 0.9247 francs from 0.9394 francs late Wednesday, marking a new low since mid-2015.

The British pound GBPUSD, +0.4714%  rose to $1.4060 from $1.4001. Meanwhile, the euro EURUSD, +0.2891%  climbed to $1.2477, from $1.2452.

Read: Here’s what Germany’s next finance minister could mean for the euro

One dollar against Canada’s currency USDCAD, +0.2081% bought C$1.2518, down from C$1.2493 late Wednesday.

What’s driving the market?

The dollar extended its downdraft Thursday, after another mixed bag of data. The greenback already turned lower Wednesday, despite an initial jump, following better-than-expected inflation data but a drop in retail sales, which is an indicator that the U.S. is in a late stage of its economic cycle, market participants said. Those mixed signals may have helped sink the dollar, analysts said.

Read: Why the U.S. dollar isn’t getting any love, despite upbeat inflation data

Expectations of a possible fourth interest rate increase this year by the Federal Reserve however grew on the back of the inflation figures and after the Fed shared its forecast of an inflation pickup later this year. Nevertheless, investors will still watch for signs of a sustainable rise in consumer prices.

What strategists are saying?

“Global rate differentials explain a lot about why the dollar can’t find a bid, even when U.S. inflation exceeds expectations. U.K. consumer prices growing faster than expected in January was a demonstration that inflation is picking up across the globe. We continue to believe the response to higher inflation and the removal of emergency stimulus from the other main global central banks means rate differentials with the U.S. will converge rather than diverge,” said Jasper Lawler, head of research at London Capital Group, in a note.

“As the European Central Bank, Bank of England & Bank of Japan move closer to tightening policy, bund, gilt & Japanese bond yields will rise faster than Treasurys, making the euro, pound and yen more attractive than the dollar,” he added.

“The continuing rise in the Japanese yen runs contrary to the rise in U.S. yields and the rise in equities. Many appear to be switching from yen-funding to dollar-funding. This runs contrary to expectations that higher U.S. interest rates and the Treasury issuing a large number of T-bills now that the debt ceiling has been lifted will increase the cost of that dollar funding,” wrote currency analysts at Brown Brothers Harriman.

What data are on deck?

Jobless claims for the week ended Feb. 10 came in at 230,000, in line with expectations of economists polled by MarketWatch.

The February Empire state index slipped to 13.1 from 17.7 before, while the Philly Fed indicator for the same month read 25.8, up from 22.2.

The producer-price index rose 0.4% in January, For the past 12 months, headline PPI came in at 2.7%, and 2.5% at the core level, which strips out more volatile components.

Industrial-production data for January showed a 0.1% contraction, undercutting consensus expectations of 0.3%, and the previous value of 0.9%. Capacity utilization for the same period eased to 77.5% from 77.7% before, underperforming the consensus forecast of 78%.

The NAHB home builders’ index stood at 72 in February, unchanged from before.

See: MarketWatch’s Economic Calendar

No Federal Reserve speeches are expected Thursday.

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