Dollar Rises Versus G-10 Peers on Unwinds Before U.S. Holiday

  • Sterling loses soft-Brexit talk traction as data miss weighs
  • Euro drops below $1.14 while bets versus yen remain bearish

Dollar Weakens Amid Positive and Negative Data Surprise

The Bloomberg Dollar Spot Index rose a second day as investors trimmed short positions amid thin flows before the U.S. holiday on Tuesday.

The dollar climbed versus all its Group-of-10 peers amid positioning rebalancing with little interest to add fresh longs, traders across Europe said. A drop in Treasuries supported the greenback, which rose to its strongest level versus the yen in more than six weeks. The Japanese currency was bid in early-Asia trading hours on news that Prime Minister Shinzo Abe’s ruling party suffered a local election loss in Tokyo, only to quickly reverse course.

Sterling initially pared a drop in European trading, trading above $1.3020 on the back of street talk about a soft-Brexit, before slumping to a fresh day low at $1.2962 after a miss in the U.K. manufacturing PMI. Fast money accounts faded the recent sterling rally, while staying on lookout to add more on a possible test of the 2017 high of $1.3048, said the traders, who asked not to be identified as they weren’t authorized to speak publicly. Stop and stop entries are located above option-related offers near that high, the traders added.

  • The euro dropped below 1.1400 amid low volumes and found support from bids within 1.1375-90, traders said
    • Further unwinding of euro longs could see the Draghi-speech breakout level near 1.1295 to be tested
    • The euro-yen cross stayed bid and near its 16-month high on Thursday; still one-month risk reversals stayed under pressure and traded at 35bps in favor of EUR puts
      • Since Bloomberg begun collecting data, one-month riskies in EUR/JPY have closed above par only during the November 2012-January 2013 period and in three days during August 2016
  • WTI crude oil was on its best run this year, up an eighth day, helping CAD and NOK limit their losses versus the dollar
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