Photographer: Andrew Harrer/Bloomberg

Dollar Declines Again Ahead of a Stormy Weekend Rife With Risks

  • Traders take profits with focus on Hurricane Irma, North Korea
  • Fed’s Dudley sees storms’ impact as risk to rate-hike timing

The dollar continued its losing ways, posting a seventh straight daily decline ahead of a weekend heavy with risk and uncertainty.

Hurricane Irma rattled markets on its path to the Florida coast, where it is expected to make landfall early Sunday morning. Also in the mix to curb risk appetite was the possibility of a North Korean missile test over the weekend. The Bloomberg dollar index was on track for its steepest weekly decline in four months amid light trading flows. Federal Reserve Bank of New York President William Dudley gave dollar bulls little to be excited about, warning that back-to-back hurricanes could affect the timing of the Fed’s next rate increase.

  • The USD remained lower vs a majority of its G-10 peers, with the Bloomberg dollar index down ~0.2% after declining as much as 0.55% overnight to its lowest level since January 2015. For the week, the greenback was on track for a decline of ~1.5%
  • Dudley told CNBC that the damage from hurricanes will make it difficult to read economic data and 3Q economic growth expectations may be revised slightly lower. It’s possible that the hurricanes may affect the timing of rate hikes, though it’s not a reason to delay the start of balance sheet normalization that should begin soon, Dudley said
  • USD pared losses as U.S. Treasuries fell in the session, lifting the yield on the 10-year Treasury as high as ~2.073% after it declined to a low of 2.014% overnight; the move by USTs may have added some momentum to USD/JPY, which rebounded after dropping to a fresh 2017 low early in the U.S. trading day
  • EUR/USD was trading ~1.2030 after briefly falling under 1.2020 and erasing overnight gains. EUR had risen as high as 1.2092, its highest since January 2015, before profit-taking capped the pair, according to traders in Asia and London familiar with the transactions who asked not to be identified because they are not authorized to speak publicly
  • USD/JPY briefly rose back above 108.00 after declining to a low of 107.32 in the U.S. session. The pair earlier saw stop-loss selling on the break of 108.00 as model-driven accounts jumped into the fray, a trader said. Some of those accounts may be forced to buy back positions if the greenback retakes territory above the 108.14 level, which had been the 2017 low from April until Thursday
  • USD/CAD rose as high as 1.2165 as the loonie declined after a report showed the Canadian economy added 22.2k jobs in August, consisting of a sharp rise in part-time workers and a decline in full-time employment
  • USD/MXN was up ~0.2%; Mexico’s strongest earthquake in more than a century hit the country overnight, killing at least 30 people
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