USD: Dollar climbs to higher ground as manufacturing industry rebounds
The US dollar surged to new highs against a basket of currencies Monday, as stocks fluctuated and gold prices reached nearly four-year lows.
The US dollar index, a weighted average of the dollar against a basket of currencies that includes the euro, yen, pound, loonie, franc and krona, surged 0.47 percent to 87.32, a four-year high. The dollar index has gained a whopping 2.1 percent in the past five sessions.
The dollar advanced against the euro, as the EURUSD tumbled 0.25 percent to 1.2492. The pair faces initial support at 1.2468 and resistance at 1.2600.
The USDJPY surged as the Bank of Japan’s move to add more stimulus continued to weigh on the Japanese currency. The USDJPY advanced 1.35 percent to 113.85. The pair faces initial support at 110.17 and resistance at 113.49.
The dollar strengthened against the British pound, as the GBPUSD declined 0.13 percent to 1.5973. The pair is likely supported at 1.5954. Resistance is ascending from 1.6025.
Gold fell to nearly four-year lows amid expectations the US dollar will prolong its bullish phase. Gold for December delivery declined $3.10 to $1,168.50 an ounce, rebounding from a low of $1,160.50 that was the lowest since July 2010.
Meanwhile, stock prices fluctuated Monday. The Dow Jones Industrial Average declined 27.01 points to 17,363.51. The S&P 500 was little changed at 2,018.92. The technology-heavy Nasdaq rose 17.59 points to 4,648.33.
Strong economic data have underscored the strength of the US recovery, raising expectations the United States Federal Reserve will begin normalizing interest rates sooner rather than later.
Monday’s manufacturing report supported those expectations. US manufacturing activity in October surged to its highest level in more than three-and-a-half-years, as 16 of 18 sub-sectors reported gains. The Institute for Supply Management’s national manufacturing index rose 2.4 percentage points in October to 59.0, the highest level since March 2011.
The new orders index rose 5.8 percentage points to 65.8. The production index advanced 0.2 percentage points to 64.8. The employment index advanced for the sixteenth consecutive month, climbing 0.9 percentage points to 55.5.
The Labor Department on Friday is expected to show the addition of 240,000 nonfarm payrolls in October, marking the seventh time in eight months job creation had eclipsed 200,000.
The Federal Reserve last week pulled the plug on QE3 after more than two years of aggressive monetary stimulus. Central bankers have yet to outline a timetable for hiking interest rates, although the latest batches of economic data suggest this could occur in the first half of 2015. Still, there are several influential Fed voices who believe interest rates should be kept at rock bottom for a longer period.
The US economy grew at an annual clip of 3.5 percent in the third quarter, outpacing expectations. The third quarter capped the United States’ strongest six-month expansion since 2003. The economy had accelerated 4.6 percent annually in the second quarter following a surprise weather-related contraction in the first three months of the year.
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