Dollar Rebounds As US-China Trade Tensions Ease

(RTTNews) - The U.S. dollar ended up higher against major currencies during the week ended October 24 amidst an easing in trade tensions between the U.S. and China as well as ebbing fears of credit stress in U.S. regional banks. The greenback withstood the renewed rate cut expectations from the Fed triggered by the softer-than-expected consumer price inflation readings released from the U.S. on Friday.

The jitters on the trade front between the U.S. and China, the anticipation ahead of Trump-Xi trade talks, fresh U.S. sanctions on Russia's oil giants, all swayed currency market sentiment during the past week. The U.S. dollar rallied against the euro, the British pound, the Japanese yen as well as the Swiss franc. It however declined against the Australian dollar, the Swedish krona, and the Canadian dollar.

The Dollar Index, a measure of the Dollar's strength against a basket of 6 currencies gained 0.53 percent during the week ended October 24. The index closed at 98.95, versus 98.43 a week earlier. Though the Index had dropped to a low of 98.39 on Monday, it touched a high of 99.14 on Wednesday and Thursday.

Data for September released by the U.S. Bureau of Labor Statistics on Friday morning had shown headline consumer price inflation rising to 3 percent from 2.9 percent in August. Markets had anticipated it to rise to 3.1 percent. The core component thereof which was expected to remain steady at 3.1 percent unexpectedly declined to 3 percent. Month-on-month inflation, which was expected to remain steady at 0.4 percent, declined to 0.3 percent whereas the core component thereof which was expected to remain steady at 0.3 percent decreased to 0.2 percent.

Amidst the dollar's rebound, the EUR/USD pair ended the week on a negative note, closing at 1.1626 versus 1.1652 a week earlier. During the week, the pair ranged between the high of 1.1677 recorded on Monday and the low of 1.1577 on Wednesday.

The GBP/USD pair had slipped 0.84 percent during the week ended October 24 amidst inflation in the U.K. unexpectedly remaining steady. The sterling declined to $1.3313, from $1.3426 a week earlier after touching a high of $1.3445 on Monday and a low of $1.3286 on Friday. Data released on Wednesday had showed annual inflation rate in the U.K. remaining steady at 3.8 percent in September, unchanged from the previous two months' levels and below expectations of 4 percent.

The Australian Dollar however rallied 0.26 percent against the U.S. Dollar during the week ended October 24. The pair ranged between the low of 0.6472 recorded on Tuesday and the high of 0.6531 recorded on Friday but eventually closed at 0.6514. The pair was at 0.6497 a week earlier. The Aussie's moves came amidst an easing in the trade tensions between the U.S. and China.

The yen weakened and the USD/JPY pair rallied 1.48 percent during the past week ended October 24 amid growing speculation that new Prime Minister Sanae Takaichi would unveil a large-scale stimulus package. The yen also declined as markets priced in the potential for a dovish monetary policy action by the Bank of Japan. The pair jumped to 152.87, from 150.64 a week earlier. The week's trading ranged between the low of 150.26 recorded on Monday and the high of 153.08 recorded on Friday. The yen weakened despite data released on Wednesday showing Japan's annual inflation rate rising to 2.9 percent in September from August's 10-month low of 2.7 percent.

At the onset of the current week and ahead of the Fed's widely expected interest rate reduction decision on Wednesday, the Dollar Index has declined to 98.89. Anticipation ahead of the third quarter GDP data and the PCE-based inflation readings for September scheduled to be released later in the week also weighed on sentiment.

The positive sentiment generated by the framework trade deal between the U.S. and China supported risk appetite. Ahead of the European Central Bank's widely expected pause on Thursday, the EUR/USD pair has increased to 1.1639 whereas the GBP/USD pair has increased to 1.3331. Ahead of Reserve Bank of Australia's interest rate decision next week, the AUD/USD pair has also jumped to 0.6550. The USD/JPY pair has decreased to 153.06 even as markets priced in the potential for a dovish monetary policy action by the Bank of Japan when it meets on Wednesday.