Dollar index rallies on encouraging US data

Friday, October 24, 2014

The dollar index extended gains for a third straight session on Thursday as steady gains, particularly against the yen and euro, off the back of better than expected US economic data which spurred a rebound in the greenback. Data yesterday showed initial weekly jobless claims came in broadly as expected, with 283K additional claims during the week ending October 18th which was slightly above the 281K expected by market participants. However, a rebound in the Chicago Fed national activity index, which increased to 0.47 in September from -0.21 the previous month, as well as a 0.5% m/m increase in the house price index while the Leading index also posted steady gains rising to 0.8% in September stood in defence of a resilient US economy.

The yen in particular posted sharp losses against the dollar, weakening to 108.35 at one stage as it lost 1.05% throughout the session. After a flight to safety saw the yen strengthen below 106.00 against the dollar earlier this month data out towards the end of the week has increased confidence as optimism slowly returns to the market. As global equity markets recover on improving risk appetite any breach of resistance around yesterday’s high could see the yen test previous consolidation around 109.00.

Gold headed lower for a second consecutive session yesterday as spot prices remained on track to end the week lower, snapping the two week bull run which had seen prices rise to a six week high towards $1,255/oz just earlier this week. After a quiet start to the week, the flurry of largely positive economic data yesterday dampened investor demand, sending prices 0.76% lower at the close as intraday selling pressure saw dips towards $1,226/oz. Holdings in the SPDR Gold Trust fell below 750 metric tonnes for the first time since November 2008 yesterday as investors sought out higher yields and a stronger dollar further compounded the weakness.

Three month LME nickel prices closed lower for a fifth session, on track to add a seventh consecutive week of price declines as the metal looks to extend its longest run of weekly losses since 2001. Prices slipped 1.0% lower yesterday to close at $15,145/tonne as fundamentals continued to push further out of balance. Official LME warehouse inventory data indicated nickel stocks increased to a record high yesterday, rising to 0.378m tonnes as significant increases in Asia continue to put pressure on the metal. Stocks have risen over 44.0% year-to-date and despite three month prices still posting year-to-date gains just below 10.0% prices have come down substantially from the peak of $21,000/tonne seen in April. Investors will be closely watching Beijing for any signs of stimulus measures while official manufacturing PMI and trade data expected at the start of next month will offer further insight into the state of Chinese demand.

DXY rallies as much as 0.67% so far this week

DXY Curncy DOLLAR INDEX SPOT 2014 10 24 07 21 47

Yen weakens on stronger US data

JPY Curncy Japanese Yen Spot 2014 10 24 07 30 02

Three month LME nickel prices extend rout as stocks rise

LMNIDS03 Comdty LME NICKEL 3 2014 10 24 07 47 21

Events for today

0700

DE

Nov

GfK Consumer Sentiment

1500

US

Sep

New Homes Sales

FN: 

Nov Crude WTI (NYMEX) 

OE: 

Nov  Copper & Gold (COMEX) 

Topics: Gold, JPY, DXY, LME, Nickel
More from: Kash Kamal