The U.S. services sector report from August supported the idea that the economy is not in recession, and the dollar advanced on Tuesday while the euro and market-sensitive Japanese yen remained declining.
The Institute of Supply Management reported that its non-manufacturing PMI crept up to a score of 56.9 in August from 56.7 in July, the second straight monthly improvement after three months of decreases. This news caused the dollar index to increase by 0.557%.
The increase in services came after the ISM’s manufacturing assessment last week, which revealed that, in contrast to other major economies, U.S. factory activity increased gradually in August.
Marc Chandler, the chief market strategist coming from Bannockburn Global Forex, said that although people are aware that the U.S. economy is declining, it is still the least unpleasant in the comparison.
The U.S. Consumer Price Index for August will be issued the following week, which will put pressure on the dollar’s strength despite the fact that this is the direction of least resistance for the currency.
The headline rate is expected to fall month over month, he said, but the core rate will indeed be stickier.
The British pound and also the euro attempted to bounce back from Monday’s multi-year lows versus the dollar.
The Bank of Japan stood out during the Jackson Hole conference as the only institution that remains determined about preserving monetary policy flexible, according to a note from HSBC. Central bank rate increases are grabbing the interest of the currency markets.
According to HSBC, the link between the dollar-yen trade rate and U.S. rates has recovered to almost its highest level of the year. The bank raised its prediction for the pair from 140 to 144 at the conclusion of the third quarter.
The yen lost further ground, falling 1.48% to 142.71 per dollar. So far this year, the dollar has gained 24% against the yen.
The standard 10-year U.S. Treasury note yield increased by 14.1 bps to 3.332%.
In contrast, because of the BOJ’s yield curve management programme, the yield on Japanese 10-year government bonds was 0.24%.
Earlier, the dollar appreciated against the euro and sterling, with the pound rising 0.04% to $1.1528. At $0.99, the euro dropped 0.26%.
A Monday report claimed that Britain’s future prime minister Liz Truss is thinking about freezing household energy costs in an effort to prevent a winter cost-of-living disaster for millions of people.
On September 9, European Union officials will meet to consider urgent, bloc-wide actions to address the spike in gas and electricity prices that is devastating the continent’s economy and raising consumer costs after Russia cut off gas exports to the region.
After Reserve Bank of Australia increased its cash rates by 50 basis points but signalled it did not follow a predetermined course for future rate hikes, the Australian dollar fell to a seven-week low.
The Chinese yuan recently fell in value and to a new two-year low in offshore trade of 6.9784 despite the government’s best efforts to stop it. Late on Monday, the Chinese central bank reduced the RRR for foreign exchange reserves, allowing banks to sell more dollars.