FX Roundup: Dollar sees mixed session after Chicago PMI data

The dollar saw mixed trading against a basket of global currencies on Monday, after the Chicago Purchasing Managers’ Index fell into negative territory.

The widely followed indicator of business conditions, which gauges sentiment across Illinois, Indiana and Michigan, declined from 56.2 last month to 48.7 in November, falling short of analysts’ expectations for a 54 reading.

However, US pending home sales rose for the first time in two months in October, balancing macroeconomic data sentiment.

The index from the National Association of Realtors (NAR) rose 0.2% month-on-month in October from an upwardly revised 1.6% decline in September, although they fell short of analysts’ expectations for a 1% increase.

At 1634 GMT, the dollar rose against the yen by 0.36% changing hands at JPY123.24. Concurrently, the pound rose 0.09% against the dollar exchanging at $1.5049, while the euro fell 0.28% to change hands at $1.0593, inching ever closer to parity against the greenback.

Continuing with major crosses, the greenback fell 0.22% against the Swiss franc exchanging at CHF1.0279, still staying comfortably above parity in the dollar’s favour during late European trading.

Meanwhile, the pound sterling traded higher against the euro fetching €1.4247 up 0.39% ahead of the European Central Bank meeting later this week.

Jane Foley, senior FX strategist at Rabobank, said, “We believe that at this stage the ECB will not implement any out-of-the-box policies yet. Instead, we see the ECB stick to what it knows, cutting the deposit rate by 15bps and increasing monthly asset purchases by €30bn.”

Elsewhere, the dollar saw mixed fortunes against selected commodity-linked currencies. The greenback fell by 0.21% against the Norwegian Krone changing hands at NOK8.6884, but registered gains of 1.23% and 1.80% against the Colombian peso and Brazilian real changing hands at COP$3,144.10 and BRL3.951 respectively.

Kit Juckes, head of forex at Societe Generale, said, “We expect a dollar correction after the FOMC meeting on 16 December. For now, the bullish bias survives, though with so much news to come, a reactive and choppy market seems inevitable. The dollar's rally though 2014-15 is due to other major economies seeing their interest rates - and in particular, their bond yields - falling by more than those in the US.

“Even now, 10-year Treasuries are just below where they were at Christmas last year. The next (and broad-based) leg of the dollar rally will be seen when (if) US yields start an uptrend. That requires the US economy to shrug off the start of the tightening cycle, and the market then to become more comfortable with the prospect of a longer-lasting uptrend in US rates.”

Finally, the Australian dollar rose against its US counterpart by 0.61% changing hands at US$0.7237, while the New Zealand dollar rose 0.69% changing hands at US$0.6578.