Daily Afternoon Report 31/08/2015
The dollar pared losses against the other major currencies today, even after data showed that manufacturing activity in the Chicago-area expanded at a slower pace than expected in August, as expectations for an upcoming U.S. rate hike continued to support. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 95.98, off lows of 95.64 hit earlier in the day. Market research group Kingsbury International said its Chicago purchasing managers’ index declined by 0.3 points to 54.4 this month from a reading of 54.7 in July. Analysts had expected the index to hold steady at 54.7 in August. The dollar remained supported after Federal Reserve Vice Chairman Stanley Fischer said Friday it was still too early to decide whether to raise interest rates from near zero at the bank’s September meeting.
Elsewhere, Euro found support after data on Monday showed that euro zone consumer price inflation rose by 0.2% last month, above expectations for a gain of 0.1% and following a 0.2% increase in July. The rate has now been below 1% for 21 straight months, well under the European Central Bank’s target of near but just under 2%.
Core CPI, which excludes food, energy, alcohol, and tobacco costs increased by 1.0% in August, matching forecasts and unchanged from July.
Also, demand for the yen was boosted as heightened risk aversion underpinned demand for the low-yielding currencies to fund investment in risk assets.
Investors are looking ahead to Friday’s U.S. jobs report for August, which could help to provide clarity on the likelihood of a near-term interest rate hike.
Markets are also awaiting Chinese data on Tuesday which was expected to show that the rate of economic growth is continuing to slow.