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USD: Dollar pacing toward weekly gain

H.S. Borji
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The US dollar pared gains against a basket of currencies Friday, easing off the 88.00 level amid a steam of upbeat economic data. The greenback is on pace for a weekly gain of around 0.2 percent, as investors look ahead to an active third week of November headlined by factory, housing and consumer inflation data.

The US dollar index, a weighted average of the dollar against a basket of currencies that includes the euro, yen, pound, loonie, krona and franc, surged to an intraday high of 88.27. It would subsequently consolidate at 87.55, declining 0.14 percent.

The dollar lost significant ground against its Canadian counterpart, as rebounding oil prices and stronger than forecast Canadian manufacturing sales lifted the loonie. The USDCAD broke below the 1.13 handle for the second time this week, dropping 90 pips to 1.1285.

The dollar strengthened against the British pound, as the GBPUSD declined another 30 pips to 1.5678. Cable has declined 1.5 percent since Wednesday.

The greenback strengthened against the Japanese yen, as the USDJPY extended its weekly gain to 1.7 percent. The USDJPY advanced 0.44 percent to 116.28.

Friday featured several high profile data releases highlighting the strength of the US recovery in the third and fourth quarters.

Business inventories rose 0.3 percent in September, while sales flat-lined after falling 0.5 percent the month before, the Commerce Department reported today. The data suggest that, while inventories were contributing positively to economic growth in the third quarter, businesses were restocking their shelves more cautiously due to weaker sales, which is generally a sign of subdued demand.

Businesses were more hopeful about future demand after the Commerce Department said retail sales rose faster than forecast in October. Retail receipts rose 0.3 percent to $444.5 billion in October, despite a 1.5 percent drop at gasoline stations.

Core sales, which exclude items like gasoline, automobiles, building materials and food, increased 0.5 percent, official data showed.

Retail sales, which account for about a third of consumer spending, are a guidepost of consumer confidence. Today’s data suggest consumers were opening up their wallets ahead of the holiday season, which is responsible for nearly 20 percent of annual retail revenues.

Separately, consumer confidence rose more than forecast this month, climbing to a fresh seven-year high in the latest sign Americans were ready for the holiday season.

The Thomson Reuters/University of Michigan preliminary consumer sentiment index increased in November to 89.4 from 86.9. Economists forecast a smaller increase to 87.5.

A brighter labour market, lower gas prices and rising household wealth boosted consumer sentiment this month. Last week the Labor Department said US employers added 214,000 jobs in October, as the unemployment rate declined to 5.8 percent from 5.9 percent. Although job growth was weaker than expected, October marked the eighth time in nine months employers added more than 200,000 jobs.

Economists are hopeful bigger earnings growth will boost household spending, which accounts for more than two-thirds of economic activity. Average hourly earnings increased only 0.1 percent in October, which translates into an annual gain of 2 percent.

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