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US dollar declines, but maintains higher ground despited mixed data

H.S. Borji
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The US dollar declined against a basket of currencies on Thursday, but is on pace for its twelfth consecutive weekly gain, as investors maintained their bullish bets on the greenback despite mixed economic data.

The US dollar index, a weighted average of the dollar’s performance against a basket of trade partners’ currencies, declined 0.25 percent to 85.76, easing off an intraday high of 85.90.

The dollar index has advanced only 0.2 percent this week, having reached fresh four-year highs. The world’s most actively traded currency is enjoying its biggest rally in decades amid growing expectations the Federal Reserve will begin raising the federal funds rate earlier than previously forecast. The Fed, which pared asset purchases for the seventh consecutive time last month, is expected to rein in quantitative easing at the October 28-9 policy meetings.

The dollar index peaked at 86.20 on Tuesday.

The greenback weakened against the euro on Thursday, as the EURUSD climbed 0.28 percent to 1.2858. The pair faces initial support at 1.2591 and resistance at 1.2672.

The USDJPY tumbled sharply, declining 0.62 percent to 108.22. The pair faces initial support at 108.06 and resistance at 109.72.

The dollar strengthened against the British pound, as the GBPUSD declined 0.34 percent to 1.6128. Initial support is likely found at 1.6110. On the upside, resistance is ascending from 1.6238.

The dollar weakened against the Swiss franc, as the USDCHF declined 0.18 percent to 0.9542. The technical levels reveal initial support at 0.9438 and resistance at 0.9590.

The latest batches of US data have been mixed, pointing to a slight cool down in the recovery efforts. On Thursday the Commerce Department said factory orders plunged 10.1 percent in August, nearly offsetting the previous month’s record surge of 10.5 percent.

The large fluctuations were due to the volatile transportation category. Factory orders surged in July after Boeing posted a record gain in commercial aircraft orders.

Excluding transportation equipment, factory orders declined just 0.1 percent in August, official data showed.

Earlier this week the Institute for Supply Management said US manufacturing activity cooled in September, but that production levels remained elevated. The monthly PMI reading of 56.6 was 2.4 percentage points below the August figure.

In a separate report the Labor Department said the number of Americans filing new unemployment claims fell last week, a sign the labour market was improving.

Initial jobless claims unexpectedly declined 8,000 to a seasonally adjusted 287,000 in the week ended September. Economists forecast a slight increase to 297,000.

The four-week moving average for claims, a less volatile gauge of firings in the labour market, declined 4,250 to a nearly eight-and-a-half year low of 294,750.

On Wednesday the ADP Institute said private payrolls increased 213,000 in September, adding further evidence the labour market recovery was deepening and that slack was abating. On Friday the Commerce Department is expected to show employers added more than 200,000 nonfarm payrolls in September for the seventh time in eight months. The unemployment rate, which is still considered high by historical standards, is expected to hold steady at 6.1 percent.

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