Dollar's Woes Deepen With Longest Losing Streak Since April 2011

  • Greenback falls to lowest since January 2015 as euro rallies
  • Aussie, kiwi jump as investors seek higher-yielding assets

U.S. Dollar Held Losses As Investors Brace for Irma

The dollar dropped for a seventh day, set for its longest losing streak since 2011, amid doubts about further Federal Reserve tightening and ongoing tensions with North Korea.

The Bloomberg Dollar Spot Index slid to the lowest since January 2015 as traders braced for Hurricane Irma, which is threatening South Florida with catastrophic winds. The Treasury 10-year yield has tumbled 13 basis points this week, sapping demand for the greenback. Australia’s dollar climbed to the strongest in two years, while New Zealand’s currency jumped as much as 1.1 percent as traders were said to cut short positions.

“The dollar’s decline is a case of dovish Fed speak, Irma following-up on Harvey, lingering debt ceiling misgivings” and a stronger euro, said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The yen shows some North Korea risk premium for the week.”

The Chinese yuan rallied towards the 6.45 level per dollar in both onshore and offshore markets as traders speculated the central bank will tolerate a stronger currency after it strengthened beyond the psychological 6.50 mark Thursday.

“The yuan’s continuing surge seems to be the trigger of broader dollar weakness today,” said Mansoor Mohi-uddin, a Singapore-based strategist at NatWest Markets, a unit of Royal Bank of Scotland Group Plc. “It’s indicating that dollar longs are still bailing out of stale positions.”

Minneapolis Fed President Neel Kashkari this week flagged the risks of higher U.S. interest rates while Fed Governor Lael Brainard urged patience on another increase. Still, Fed Bank of New York President William Dudley Thursday reiterated the need to keep raising rates. Traders are bracing for a possible missile launch from North Korea by Saturday, the country’s foundation day.

  • BBDXY falls 0.3%, extending this week’s decline to 1.6%; 7-day losing streak is longest since period ended April 29, 2011
  • USD/JPY drops 0.2% to 108.23 after sliding 0.7% Thursday
    • Interbank option desks are holding large over-the-counter USD/JPY barriers with strike price at 108.00 expiring Friday, according to Asia-based FX traders
  • EUR/USD climbs 0.4% to 1.2067 after jumping 0.9% Thursday when ECB’s Draghi stopped short of attempting to talk the currency lower
  • U.S. 10-year yield little changed Friday at 2.04% after dropping to 2.03%, lowest since Nov. 2016
  • AUD/USD strengthens 0.7% to 0.8106; reached 0.8108, highest since May 2015
    • Gains partly driven by Australian corporates raising their hedging bids from 0.7980 to as high as 0.8040 in the last 24 hours, says an Asia-based FX trader
  • NZD/USD rallies 1.2% to 0.7316
    • Stop-loss buying in NZD/USD above 0.7242 overnight high for fast-money funds took kiwi to its session peak, says an Asia-based FX trader
  • Some information comes from FX traders familiar with the transactions who asked not to be identified because they aren’t authorized to speak publicly

— With assistance by Michael G Wilson

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