Dollar Pares Second-Best Weekly Gain of 2017 in Late Selling

Updated on
  • Greenback pares advance following report Trump favors Powell
  • Euro drops for a second week as Spain political crisis deepens

Dollar Drops Before Fed Chair Call

The dollar pared its second-best weekly advance of the year as a bout of late selling eroded gains seen after the U.S. economy posted stronger-than-expected growth and the Spanish political crisis lurched forward.

The Bloomberg Dollar Spot Index was little changed on the day after rising as much as 0.4 percent. The greenback had been supported Friday by an advance reading of third-quarter U.S. growth of 3 percent, capping the economy’s best six-month performance since 2014. Dollar gains were pared and Treasuries jumped after a report that President Trump favors Jerome Powell for the next chair of the Federal Reserve.

  • The earlier greenback advance built on Thursday gains amid optimism about U.S. tax reform and a euro slump after the ECB said it will extend its asset purchases at least through September 2018 at the reduced monthly pace of EU30b, a more dovish outcome than some expected
  • The greenback could push further if U.S. tax reform moves ahead quickly now that the House has approved a budget resolution. Renewed focus on interest-rate differentials also bodes well for dollar bulls
  • The dollar was mixed vs G-10 peers Friday, with the strongest advance against the euro as EUR/USD fell to its lowest since July 20. Gains were pared after the report on Powell, who is seen as more dovish than rival candidate John Taylor. The weekly gain of ~1% as of 3:38pm New York time was the second-best since December, after a 1.05% gain in the week ended Sept. 29
  • The New Zealand dollar was the biggest gainer vs the greenback as the kiwi rebounded from steep losses seen the past two weeks. Meanwhile, EM FX stabilized, paring weekly losses. The euro was on a defensive footing and lower vs major peers. 
  • EUR/USD was trading around 1.1602 after falling to a three-month low of 1.1575. Spanish PM Rajoy said he’s calling for a Catalan election for Dec. 21 after dissolving the regional parliament. The shared currency had briefly rebounded to above 1.1620 after the Fed succession report
  • USD/JPY was trading near a fresh low at 113.67. The USD rose to 114.45 after the GDP data, its highest since July, before offers capped the pair ahead of technical resistance. USD bulls are mindful that USD/JPY has struggled to maintain its footing on a 114.00 handle despite a rise in Treasury yields
  • USD/CAD reversed gains and fell to 1.2826 as oil rose. The pair briefly reversed all losses since the BOC began removing accommodation on July 12, rising as high as 1.2917
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