Dollar Ends Week at 13-Month Low as Euro Surges

  • EUR extends advance as ECB tapering remains on the radar
  • USD fell to a low after Spicer quit press secretary post

Kumar Says Weaker Dollar Won’t Save U.S. Equities

The dollar is on track to record a loss of almost 1 percent for the week, while the euro racked up gains of about 1.8 percent, as investor sentiment shifted in favor of the shared currency on signs that the European Central Bank is preparing to pare its support for the economy.

The greenback saw renewed afternoon selling amid the resignation of White House Press Secretary Sean Spicer after the appointment of financier Anthony Scaramucci as communications director. The move weighs on investors already considering the effect of Special Counsel Mueller’s investigation on the president’s ability to advance his economic agenda. The euro advanced as traders tried to get ahead of the ECB, which has signaled that in the autumn it will discuss tapering its asset-purchase programs.

  • The Bloomberg euro index gained about 1.6% for the week after Draghi said Thursday that discussions will begin on adjusting QE programs at meetings during the fall, though he steered clear of setting a firm date; his actions came after weeks of speculation that such a shift was in the works and the euro rallied on the confirmation
  • Draghi said that the ECB remains far from achieving its mandate to get inflation close to, but below 2%, though he indicated that an improved economic outlook will feed through to wages and then prices; those expectations have also been expressed by the U.S. Fed, which is about to embark on its own tapering program, though it too finds its inflation objective elusive
  • Amid policy setbacks that have delayed President Trump’s plans for fiscal stimulus, traders have pared bets that the Fed will raise rates again this year, despite recent assertions from officials; the Fed meets next week to decide on policy and investors will parse its policy statement for any shift in tone or sentiment
  • EUR/USD trading around 1.1673 after reaching a fresh 23-month high at 1.1683 during the afternoon session, the strongest since the August 2015 peak at 1.1714, an objective for technical traders. Beyond there, the 2015 high above 1.2100 comes into view
  • USD/JPY is trading around 111.04, near session low of 111.01, as a drop in Treasury yields undercut the greenback; the pair extended declines below an area of technical support just under 112.00 that had underpinned the dollar; while JPY is expected to remain broadly defensive as the BOJ anchors policy rates near zero, the yen has gained support from an unwind of certain cross trades such as AUD/JPY and GBP/JPY, traders say
  • AUD/USD fell more than 1.4% from Thursday’s peak of 0.7989 and remains well below that level after an RBA deputy governor pushed back on hawkish interpretations of recently released RBA minutes while also saying that a weaker currency would help the economy, a notion the RBA has expressed in the past
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