SINGAPORE: The dollar was headed for its third weekly gain in a row on Friday, helped by a dovish European Central Bank and strong US data that is pushing out expectations for how fast US rates can fall, particularly if Donald Trump wins the presidency.
In Asia, a slew of economic data from China, including third-quarter growth figures, was met with a muted response from markets, though subsequent comments from the country’s central bank providing further details of Beijing’s stimulus measures helped lift Chinese assets broadly.
The Australian dollar, often used as a liquid proxy for the Chinese yuan, was last up 0.2% at $0.6708, extending its gains slightly from earlier in the session.
The onshore yuan ticked 0.06% higher to 7.1199 per dollar, while its offshore counterpart rose 0.12% to 7.1282.
Gains in the currencies became more pronounced after the People’s Bank of China (PBOC) officially launched the Securities, Fund, and Insurance Swap Facility (SFISF) on Friday and as policymakers signalled the potential for further monetary easing ahead alongside other support measures to prop up the ailing Chinese economy.
Those came shortly after Friday’s data dump which showed China’s third-quarter growth numbers were slightly better than expected, but property investment fell more than 10% in the first nine months of the year.
Retail sales and industrial production picked up in September.
“The overall tone is actually not bad, given that the nominal GDP itself has also stabilised. I think the pace of growth is similar to what we saw in the second quarter, so the market is actually taking this in stride,” said Ho Woei Chen, an economist at UOB.
“The focus is actually on what the government is going to do next in terms of the size of the fiscal stimulus.”
In other currencies, the euro is down almost 1% for the week so far, has fallen through its 200-day moving average, and at $1.0837 in Asia trade is parked near a 2-1/2 month low.
On a rolling basis, the dollar’s 3.1% three-week gain on the euro is the sharpest rally since the middle of 2022, and it has forged to the strong side of 150 yen for the first time since early August.
The greenback pared some of those gains and last bought 149.93 yen on Friday. Data on Thursday showed US retail sales growth was higher than expected and the ECB cut interest rates by 25 basis points.
Four sources close to the matter told Reuters the ECB was likely to cut again in December unless economic data suggests otherwise.
Dollar hovers near 11-week high, eyes on China property briefing
Meanwhile, markets have been disappointed at the lack of detail offered by Chinese authorities on plans to revive the slowing economy, and the yuan is headed for its largest weekly fall in more than 13 months against a resilient dollar.
“All of that has played in to a stronger dollar,” said Jason Wong, senior strategist at BNZ in Wellington.
“There’s also been a Trump trade going on in the background,” he said, with the dollar tracking Trump’s newfound lead in election prediction markets, since his tariff and tax policies are seen as likely to keep US interest rates high.
The New Zealand dollar was similarly eyeing a 0.75% fall for the week and was little changed at $0.6063 in the Asia session.
Trump’s prospects have also set bitcoin rallying since his administration is seen as taking a softer line on cryptocurrency regulation. It was last at $67,867.11, up more than 10% since Oct. 10.
The US goes to the polls on Nov. 5.
In geopolitics, Israel said it had killed Hamas leader Yahya Sinwar in Gaza, a mastermind of the Oct. 7, 2023, attack that triggered war.
Israel’s shekel rose and touched a two-week high after the news, though Israeli Prime Minister Benjamin Netanyahu said fighting would go on and broader markets had little immediate reaction.
Sterling regained the $1.30 level overnight and held above that level on Friday, but is also headed for a weekly loss after a bigger-than-expected drop in British inflation raised bets the Bank of England might cut interest rates twice before the end of the year.
British retail sales and US housing starts data are due later on Friday, as are plans from Japan’s largest union group, Rengo, for the year’s wage negotiations.
Data showed Japan’s core consumer prices were up 2.4% year-on-year in September, a bit higher than expected.
The US dollar index hit a 2-1/2 month high of 103.87 on Thursday and is up nearly 0.8% for the week thus far.
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