The dollar was holding a mixed tone Wednesday, slipping slightly against the euro as it relinquished some overnight strength but gaining against the yen in moves that were linked to a positive tone in U.S. stocks. Euro-dollar was changing hands at $1.3080 Wednesday afternoon, the euro in the upper reaches of a very slender $1.3060-1.3090 U.S. hours range after the euro began the session around $1.3065. Dollar-yen meantime was changing hands at Y82.38, the dollar in the upper reaches of its Y82.02-44 U.S. hours range after beginning the day at Y82.16.
Afternoon dealings saw both the euro and dollar-yen holding a modestly positive tone against a backdrop that included solid gains in stocks, where the Dow Jones Industrial Average was holding gains of about 120 points, or 1%, amid improved optimism over fiscal cliff talks in Washington. Earlier in the day, the Dow had relinquished gains of about 60 points to trade in the red as the pendulum of optimism/pessimism swung the other way. Early in the afternoon a White House spokesman expressed optimism that a compromise could soon be reached in the fiscal cliff standoff, that upbeat tone underpinning risk-appetites. That better risk tone added lift to euro-dollar which pushed to its highest level of the U.S. session around $1.3090 before being slowed by offers ahead of $1.3100. Overnight, euro-dollar had stalled at $1.3127 and reversed lower as weak longs threw in the towel, the euro finding a base in early U.S. dealings, making
for a pitifully narrow range during U.S. hours. The better stock tone and risk tone was aided by positive U.S. economic data released Wednesday, though the data was, for a while, overshadowed by the fiscal cliff rhetoric. Similarly, dollar-yen was holding near its high of the session after spending much of the day mired in a tight range below Y82.25, the greenback lifting to fresh highs for the day during the midsession as the better stock tone took hold. Offers to sell dollar-yen are positioned at Y82.50, slowing gains in afternoon dealings.
U.S. economic data released Wednesday – The November Institute for Supply Management Non-Manufacturing Index rose to 54.7 after a storm depressed 54.2 October reading. The sub-indexes included prices at 57.0, employment at 50.3 after 54.9, and new orders at 58.1 following 54.8. ISM said, “The NMI registered 54.7 in November, 0.5 percentage point higher than the 54.2 percent registered in October. This indicates continued growth at a slightly faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 61.2 percent, which is 5.8 pts higher than the 55.4 percent reported in October, reflecting growth for the 40th consecutive month.”
Private payrolls processor ADP projected that the U.S. economy added 118,000 jobs in November but said also that, “Superstorm Sandy wreaked havoc on the job market in November, slicing an estimated 86,000 jobs from payrolls. The manufacturing, retailing, leisure and hospitality, and temporary help industries were hit particularly hard by the storm. Abstracting from the storm, the job market turned in a good performance during the month.” Third quarter productivity revisions were about as expected, with nonfarm productivity now up 2.9% versus 1.9% originally, and Unit Labor Costs down 1.9% versus down 0.1%. The upward growth revisions and cuts in personal income in the GDP revision completely explain the changes. Factory new orders rose 0.8% in October, much better than expectations of a 0.1% decline.
EasyForexNews Research Team