The US dollar is soaring toward the end of the trading week, one day after the Federal Reserve confirmed that it will taper its quantitative easing program and leave interest rates unchanged near zero. Even with inflation lingering in the background, the greenback has been surging this week. For now, it is all about the data.
According to the Bureau of Labor Statistics (BLS), initial jobless claims fell to 269,000 in the week ending October 30, lower than the median estimate of 275,000. This is down from last week’s reading of 283,000.
Continuing jobless claims dropped to 2.105 million, while the four-week average, which eliminates week-to-week volatility, declined to 284,7500.
On the trade front, the trade deficit widened to $80.9 billion in September, more than the market forecast of $80.5 billion. This is also up from the trade gap of $72.8 billion in August.
Imports rose 0.6% to a fresh record high of $288.5 billion in September, buoyed by greater acquisitions of capital goods, organic chemicals, and passenger goods. Exports tumbled 3% to $207.6 billion in September, the worst performance since April. Falling exports were driven by a decline in sales for industrial supplies and materials.
The US government further reported that non-farm productivity slipped 5% in the third quarter, while unit labor costs advanced 8.3% during the July-to-September period.
On Wednesday, the Fed completed its two-day Federal Open Market Committee (FOMC) policy meeting where it announced that it will trim its ultra-aggressive pandemic-era QE program by $15 billion a month beginning this year. It plans to wind down the stimulus and relief initiative by the summer of next year.
Interest rates were left the same as Fed Chair Jerome Powell stressed a more “patient” central bank, although it could act if inflation spirals out of control.
“Inflation is elevated, largely reflecting factors that are expected to be transitory,” officials said in the statement. “Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors.
The US Treasury market was red across the board, with benchmark 10-year yield down 0.051% to 1.528%. The one-year bill dipped 0.02% to 0.15%, while the 30-year bond shed 0.012% to 1.974%.
The US Dollar Index (DXY) rose 0.51% to 94.34, from an opening of 93.86, at 15:06 GMT on Thursday. The index, which measures the greenback against a basket of currencies, is poised for a weekly rally of at least 1%. Year-to-date, the DXY is up nearly 5%.
The USD/CAD currency pair swelled 0.52% to 1.2458, from an opening of 1.2391, at 15:06 GMT on Thursday. The EUR/USD fell 0.61% to 1.1541, from an opening of 1.1614.