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Categorized | Currencies

Dollar surges on US durable goods bounce back

Posted on November 23, 2016

The dollar rally has received a fresh burst of momentum on Wednesday after durable goods order picked up sharply in October and provided further evidence that US manufacturers will end the year on stronger footing following a disappointing start to the year.

The greenback surged higher against of all its G-10 peers, with the DXY dollar index climbing 0.6 per cent to 101.62 – its highest level since April 2003.

Against the yen, the dollar strengthened to a near eight month high of 112 yen.

The buck also extended its gains against the euro to €1.055, a near 1-year high.

After erasing its losses earlier today, the sterling is now back down 0.4 per cent against the dollar at $1.237.

The Swiss franc fell 0.5 per cent to a 9-month low of $1.016.

The dollar also strengthened against emerging market currencies. The Turkish lira rose 0.9 per cent to hit a fresh record low of 3.41 per dollar. The JPMorgan EM Currency Index fell 0.8 per cent to its lowest level in nearly 9 months.

The pick up in the dollar comes after the Commerce Department said orders for durable goods – products such as cars, tractors and refrigerators designed to last longer than three years – jumped 4.8 per cent in October. The figure is a bounce back from the 0.3 per cent decline recorded in September and easily trounced the 1.7 per cent increase the market was expecting.

Excluding the volatile transportation component, orders were up 1 per cent, also topping expectations of a 0.2 per cent increase.

The dollar has been on the rise since Donald Trump’s US election victory in the November 8 US elections. HSBC said “the building blocks of President-elect Donald Trump’s policies point to USD strength in the near-term.”

Meanwhile, “US and European politics in combination with the US policy cycle, is creating a ‘perfect storm’ for even more persistently elevated [foreign exchange] volatility,” noted analysts at Deutsche Bank.