Key Updates for Friday, October 10th
The U.S. dollar (USD) saw a slight retreat after four consecutive days of gains, as investors awaited preliminary results for the University of Michigan’s Consumer Sentiment Index for October. Later, Statistics Canada is set to release employment figures for September.
USD Price This Week
This week, the U.S. dollar has shown relative strength against major currencies, particularly the Japanese yen.
The following table illustrates the percentage changes of the USD against other currencies:
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.17% | 1.03% | 2.18% | 0.44% | 0.35% | 1.09% | 1.13% | |
| EUR | -1.17% | -0.24% | 0.94% | -0.76% | -0.84% | -0.13% | -0.07% | |
| GBP | -1.03% | 0.24% | 1.26% | -0.52% | -0.60% | 0.12% | 0.17% | |
| JPY | -2.18% | -0.94% | -1.26% | -1.67% | -1.85% | -1.16% | -1.08% | |
| CAD | -0.44% | 0.76% | 0.52% | 1.67% | -0.05% | 0.64% | 0.69% | |
| AUD | -0.35% | 0.84% | 0.60% | 1.85% | 0.05% | 0.72% | 0.78% | |
| NZD | -1.09% | 0.13% | -0.12% | 1.16% | -0.64% | -0.72% | 0.05% | |
| CHF | -1.13% | 0.07% | -0.17% | 1.08% | -0.69% | -0.78% | -0.05% |
The heat map above shows percentage changes between key currencies. For instance, if looking at USD against JPY, the displayed percentage indicates USD’s performance versus the yen.
In political news, Democrats and Republicans failed to reach an agreement on reopening the government, as a funding bill was rejected with a 54-45 vote. The Senate plans to reconvene on Tuesday, but no further votes on the bill are expected until then. On a related note, the New York Times reported that the U.S. Bureau of Labor Statistics will be recalling some furloughed staff to prepare for the September Consumer Price Index (CPI). However, it remains uncertain if inflation data will still be published on October 15 as scheduled. Meanwhile, the U.S. dollar index was staying below 99.50 in Europe on Friday, following a more than 0.5% rise the previous day, while U.S. stock index futures showed slight increases.
In Canada, there’s an expectation that the unemployment rate will climb a bit to 7.2% in September from 7.1% in August. The USD/CAD rate was stable around 1.4000 during the European morning on Friday after hitting above 1.4030 earlier, marking its highest level since April.
As for USD/JPY, it remained steady around 153.00 early Friday morning, showing an increase of over 3.5% since the week’s start. Speculation about Japan’s political issues is hindering any significant rebound in the yen. Komeito leader Tetsuo Saito mentioned that he can’t align with Japan’s ruling Liberal Democratic Party concerning monetary and political issues, hinting at a wish to reset the LDP coalition government temporarily.
Looking at EUR/USD, it dropped more than 0.5% on Thursday, marking its fourth consecutive day in the red. While there was a slight correction upward early Friday, it remains below the 1.1600 mark.
GBP/USD stabilized around 1.3300 in European trading on Friday after a decline of about 0.75% the day before.
In the commodities sector, easing geopolitical tensions in the Middle East caused notable shifts in the gold market on Thursday. After a 1.6% drop, ending below $4,000, XAU/USD is currently struggling to regain momentum, fluctuating within a narrow range above $3,980.
Reserve Bank of Australia (RBA) Governor Bullock stated on Friday that services inflation is “somewhat sticky,” and acknowledged that the labor market, though slightly tighter, is approaching balance. This comes after a 0.5% decline on Thursday. As of Friday morning in Europe, the AUD/USD remained locked in a modest daily gain above 0.6560.
US Dollar FAQs
The United States dollar (USD) serves as the official currency of the U.S. and functions as a major currency in other nations. Often seen as the most traded currency globally, it accounts for over 88% of foreign currency trading, with an average daily trading volume of $6.6 trillion. Following World War II, the USD surpassed the British pound as the primary reserve currency, and, for many years, it was backed by gold until the gold standard was ended in 1971.
The Federal Reserve’s monetary policy is a key determinant of the USD’s value. The Fed has dual roles: ensuring price stability and promoting full employment. Interest rates are the main tool used to achieve these goals. When inflation exceeds the 2% target, the Fed may raise rates to bolster the dollar’s value. Conversely, if inflation is below the target or if unemployment is high, rate cuts may occur, potentially weakening the dollar.
In extreme situations, the Federal Reserve might opt to print more dollars through quantitative easing (QE). This policy increases the flow of credit in a stalled financial system and was notably used during the 2008 financial crisis, involving the purchase of U.S. Treasuries, primarily from banks. Typically, QE can lead to a weaker dollar.
On the flip side, quantitative tightening (QT) involves the Fed ceasing its bond purchases and not reinvesting when bonds mature. This generally supports the dollar’s strength.
