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Dollar Gains On Yen, But EUR/USD, GBP/USD Up, China PMIs Noted

11/30/2017, 11:17:05 AMBasics of Trading
Dollar Gains On Yen, But EUR/USD, GBP/USD Up, China PMIs Noted

The dollar rose against the yen in Asia on Thursday, but slid overall on a weighted-basis as the pound and euro showed strength with investors awaiting the US Senate on Donald Trump's tax cut plans.

China's manufacturing PMI rose to 51.8 in November, a faster pace than expected 51.4 level expected while non-manufacturing also gained to 54.8 from 54.3 in October, official data released Thursday showed.

A reading above 50 indicates expansion, while a reading below that signals contraction.

"The latest official PMI readings suggest that growth momentum held up well this month," Julian Evans-Pritchard, China economist at Capital Economics, said in a note following the data release.

The release of a private PMI survey may paint a better picture of the economic situation in China. The Caixin/Markit manufacturing PMI is expected to be published on Friday, with the services PMI reading coming next Tuesday.

The private surveys tend to focus on small and mid-sized firms.

Earlier, Japan reported provisional industrial production for October up 0.5%, compared with a provisional gain of 1.9% expected on month. Australia reported building approvals for October rose 0.9%, compared with a 1.8% fall expected and private sector credit hit a 0.4% gain seen on month.

USD/JPY changed hands at 112.00, up 0.06%, while AUD/USD traded at 0.7589, up 0.24% after the PMI figures from top trading partner China.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.16% to 93.07.

GBP/USD traded at 1.3478, up 0.53% as momentum on resolving Brexit issues gathers pace. EUR/USD rose 0.19% to 1.1869.

Overnight, the dollar traded roughly unchanged against a basket of major currencies as upbeat economic data and signs of progress on tax reform lifted sentiment but a surge in sterling weighed on upside momentum.

Gross domestic product increased at a 3.3% annual rate in the July-September period, the US Commerce Department said in its second estimate of GDP on Wednesday, beating a previous estimate of 3%.

Pending Home Sales rose 3.5% in October following a 0.4% decline in the previous month amid an uptick in housing activity. That beat economist forecast for a 1% rise.

The reports came as outgoing Federal chair Janet Yellen testified on the economic outlook before the Congressional Joint Economic Committee on Wednesday.

Yellen reaffirmed the central bank’s stance on monetary policy of gradual rate hikes amid concerns that the economy would overheat. Yellen's somewhat hawkish comments lifted Treasury yields, supporting an uptick in the dollar.

"We are not seeing undue inflationary pressure in the labor market, so our policy remains accommodative," Yellen said. "But we do think it's important to gradually move our policy rate toward what I'll call a neutral level, which would be consistent with sustainably strong labor market conditions," she said.

Upside in the dollar was capped, however, amid a rally in sterling to a two-month high against the greenback on news reports of a UK-EU agreement on the so-called Brexit divorce bill.

If a settlement on the Brexit divorce bill is agreed, it paves the way for UK-EU discussions on an interim trade deal, easing the risk of “hard Brexit” – the UK exiting the EU without a trade deal.

OPEC and key ally Russia will extend output curbs for nine months, but likely review the deal in June of 2018 depending on market conditions. A formal announcement on the pact will be made on Thursday.