Japanese yen and U.S. dollar banknotes are seen with a currency exchange rate graph in this illustration picture taken June 16, 2022. REUTERS/Florence Lo/Illustration/File Photo Acquire Licensing Rights
LONDON/NEW YORK, Sept 7 (Reuters) – The dollar gained on Thursday after earlier pushing the yen to a 10-month low, and kept the euro and sterling pinned near their weakest levels in about three months, as investors placed their bets on a still-resilient U.S. economy amid the recent spate of stronger-than-expected data.
China’s onshore yuan slid to a 16-year low versus the greenback, under pressure from a property slump, weak consumer spending and shrinking credit growth in the world’s second-largest economy.
Against a basket of currencies including the euro and sterling, the dollar rose 0.1% to 104.98, holding on to some of its gains from the previous session after scaling a six-month peak as the U.S. services sector unexpectedly gained steam in August.
More data on Thursday further pointed to a relatively tenacious U.S. economy.
Initial claims for state unemployment benefits fell unexpectedly to 216,000 in the week ended Sept. 2 from a revised 229,000 the week before. The latest week’s numbers were the lowest since February. Economists polled by Reuters had forecast new claims would rise to 234,000 in the latest week.
A separate report showed worker productivity in the second quarter was not as strong as initially reported, but still remained solid.
Nonfarm productivity – measuring hourly output per worker – increased at a 3.5% annualized rate in the period from April through June versus negative 1.2% in the first three months of the year. Second-quarter productivity had initially been estimated at 3.7%, the strongest since the third quarter of 2020.
Recent economic reports are “supporting the case for continued aggregate income growth while pushing recession worries further into the future,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
“With oil prices on the rise and consumption remaining strong, investors are bracing for a slower disinflation process and a more gradual pivot toward rate cuts from the Federal Reserve.”
Market pricing shows a more than 40% chance that the Fed will deliver another rate hike in November, according to the CME FedWatch tool, though expectations are for policymakers to keep rates on hold later this month.
ONSHORE YUAN HIT 2007 LEVELS
The onshore yuan sank to 7.3299 per dollar, its weakest since December 2007.
China has rolled out a series of policy measures in recent months to revive a stumbling economy after its post-pandemic recovery fell away quickly. Investors remain on the lookout for further support measures from Beijing to revive market confidence.
Data on Thursday showing a lower-than-expected fall in China’s exports and imports numbers in August did little to lift investors’ spirits.
The Australian dollar was about flat at US$0.6382, while the New Zealand dollar rose 0.3% to US$0.5885, with both languishing near their recent 10-month lows.
The two antipodean currencies are often used as liquid proxies for the Chinese yuan.
The China-sensitive euro was last 0.2% lower at $1.0709, after having fallen to its lowest since June on Wednesday.
European Central Bank (ECB) policymakers warned investors that the decision for a rate increase next week was still up in the air, but a rise in borrowing costs was among the options on the table.
INTERVENTION WATCH
In Japan, traders continued to be on intervention watch as a fragile yen struggled to make headway against a resilient dollar, even as officials stepped up their warnings against a sell-off in the currency.
The greenback scaled a fresh top of 147.875 yen earlier, its highest since last November. The yen last edged 0.4% higher to 147.095 per dollar.
Elsewhere, sterling fell 0.3% to $1.2470, touching a three-month trough.
Bank of England (BoE) Governor Andrew Bailey said on Wednesday the central bank was “much nearer” to the end of its rate-hike cycle, though borrowing costs might still have further to rise because of stubborn inflation pressures.
Markets currently see a 71% chance of a BoE rate hike on Sept. 21.
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Currency bid prices at 10:54 AM (1454 GMT)
Reporting by Joice Alves in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Rae Wee and Winni Zhou; Editing by Sharon Singleton, Chizu Nomiyama and Nick Zieminski
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