The US dollar strengthened against a basket of currencies on Wednesday, as stronger than expected economic data reinforced the view that the Federal Reserve will begin raising interest rates next month for the first time in nearly a decade.
The US dollar index, a weighted average of the dollar against a basket of six currencies, climbed 0.5% to 100.05, its highest level since March 13. With Wednesday’s gains, the dollar has strengthened 3.3% over the past four weeks and boasts a year-to-date return of nearly 11%.
In economic data news, US durable goods orders rebounded sharply in October, while a separate gauge of business investment plans rose at it fastest pace in three months.
Orders for manufactured goods meant to last three years or more climbed 3% in October, following declines in both September and August, the Commerce Department reported on Wednesday. That was double the forecast rate of 1.5%.
Non-defense capital goods orders excluding aircraft – a key proxy for business spending plans – rose 1.3%.
Separately, the Labor Department also said that initial jobless claims fell back toward 42-year lows last week, offering further evidence of a tightening labour market.
Initial claims for unemployment benefits declined 12,000 to a seasonally adjusted 260,000 for the week ended November 21, government data showed. A median estimate of economists forecast jobless claims to dip slightly to 270,000 last week.
The four-week moving average for claims, which removes week-to-week volatility, was unchanged at 271,000.
The dollar posted solid gains against the euro and Swiss franc. The EUR/USD exchange rate fell 0.5% to 1.0592 after touching an intraday low of 1.0577. The USD/CHF exchange rate also climbed 0.5% to 1.0219.
The greenback also advanced against the Japanese yen and Canadian dollar.
Commodity prices drifted lower on Wednesday after posting a large rally the previous session. Precious metals were down across the board, with February gold falling $3.80 or 0.4% to $1,069.50 per troy ounce.
Oil prices also reversed Tuesday’s gains, with US crude falling 81 cents or 1.9% to $42.06 a barrel on the New York Mercantile Exchange. Global benchmark Brent crude fell 82 cents or 1.8% to $45.30 a barrel on ICE Futures Europe.
European stock markets also rebounded from Tuesday’s selloff. London’s FTSE 100 Index climbed 0.9% in intraday trade. Germany’s DAX Index was up 1.8%. The pan-European STOXX 600 Index advanced 1.5% after declining by 1.2% on Tuesday.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.