Dollar shakes two-day fall on solid data, Fed speakers

Money counter counts 100  U.S. dollar banknotes in a bank in Bern
A money counter counts 100 U.S dollar banknotes in a bank in Bern August 15, 2011. REUTERS/Pascal Lauener

November 13, 2015

By Dion Rabouin

NEW YORK (Reuters) – The dollar rose on Friday as statements from Federal Reserve officials and U.S. economic data continued to support expectations that the U.S. central bank may raise interest rates in December.

U.S. consumer sentiment beat forecasts, gaining for the second straight month and showed an improvement in buying plans for large discretionary purchases, especially vehicles.

The euro gained some ground in volatile, thin trading just as futures markets closed after news that least 40 people were killed in shootouts in central Paris.

Marc Chandler, currency strategist at Brown Brothers Harriman, said the move was more than likely smaller speculators getting out of existing positions, and not a fundamental reaction driving flows to the euro.

As a result of the modest uptick in the euro <EUR=>, the euro zone single currency ended the day down 0.4 percent to $1.0777.

Other U.S. data on Friday, including a weaker-than-expected retail sales report and a second straight monthly decline in producer prices, failed to knock the dollar. The soft inflation and signs of slowing consumer spending appeared unlikely to deter the Fed from a rate hike next month, economists said.

“Retail sales were disappointing again, but we’ve seen consistently these numbers disappoint over the past little while,” said Shaun Osborne, chief currency strategist at Scotia Capital in Toronto.

“It does look as if consumer demand has gotten off to a fairly sluggish start in the quarter, but the general backdrop I would imagine for the consumer is still quite constructive in the U.S.”

Comments from Fed Vice Chair Stanley Fischer late Thursday and from Cleveland Fed President Loretta Mester on Friday underpinned the widely held belief that the Fed intends to raise rates at its next meeting in December.

Fischer told a conference at the Fed Board he expects U.S. inflation to rebound next year and noted the Fed could raise rates soon. Mester, who is not a voter on the Fed’s rate-setting committee this year but will be in 2016, said America’s labor market appears near full strength and that the time to hike is “quickly approaching.”

The dollar firmed nearly 1 percent against both the euro and Swiss franc on the day.

Versus the Swiss franc <CHF=>, the dollar gained 0.7 percent, moving to 1.0067 francs. It was headed for a modest 0.1 percent weekly gain.

The dollar also moved higher on the day against the yen <JPY=>, sterling <GBP=D3> and the Swedish <SEK=> and Norwegian crowns <NOK=>. It was also up against the Canadian <CAD=>, Australian <AUD=D4> and New Zealand <NZD=D4> dollars.

The dollar index <.DXY>, which measures the dollar against a basket of other major currencies, rose 0.3 percent to 98.948. The index is down about 0.2 percent this week as profit-taking sent it lower earlier in the week.

(Reporting by Dion Rabouin; Editing by James Dalgleish)