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The Chinese yuan gained the most against the
dollar, reaching a year-and-a-half high in the offshore market
as a holiday in China dried up liquidity, exaggerating the
moves. In addition, Chinese data on Wednesday showed its
economic recovery was on track.
The Australian dollar and the Norwegian crown also rose versus
the dollar.
"There's been certainly a dent in liquidity," said Jeremy
Stretch, head of G10 FX strategy at CIBS, which usually
amplifies market moves. "But what we have seen so far is a
generalised risk-on bias on optimism of a stimulus package in
the U.S."
"There's a bit of a race for Congress to get something in the
books before they leave for the recess for the election. If
you've got airlines talking about laying off more than 30,000
workers, that doesn't play as a positive narrative going into
the election if you're the incumbent," Stretch said.
Republican President Donald Trump's administration has proposed
a coronavirus stimulus package to House Democrats worth more
than $1.5 trillion, and hopes are rising that both parties will
reach a compromise.
At the same time, jobs figures that showed U.S. private
employers stepped up hiring more than forecast last month and
that Midwest manufacturing grew faster than expected also fed
into the optimism.
However, U.S. employers announced another 118,804 job cuts in
September, reports showed on Thursday.
The fall in the dollar began the day before, the last day of the
month and the third quarter, Derek Halpenny, head of research at
MUFG, pointed out.
Short-term traders had expected the dollar to rise. When it
didn't, they were squeezed out of those positions, "resulting in
some sizeable moves weaker for the dollar versus certain G10 and
EM currencies," Halpenny said.
According to latest BNP Paribas research, market participants
have added a few short positions on the dollar compared with
last week.
Along with strong U.S. labour and manufacturing data, the mood
pulled the dollar down 0.3% to 93.56 against a basket of
currencies <=USD>, its weakest since Sept. 22. <MKTS/GLOB>
More U.S. economic data are due later in the day, including
initial jobless claims and the manufacturing Purchasing
Managers' Index.
The euro zone manufacturing recovery gathered pace last month,
according to the final reading of the manufacturing PMI, which
came in at 53.7. But official data showed unemployment across
the region rose to 8.1% in August, as expected.
The euro was last trading at $1.1765 <EUR=EBS>, up 0.4% on the
day and its highest since Sept. 22.
Euro/dollar could fall to $1.16 if the U.S. stimulus doesn't go
through, said Tim Graf, FX strategist at State Street.
The Australian dollar rose 0.5% at $0.7204, its highest since
Sept. 22 <AUD=D3>. The Norwegian crown gained 0.7% at 9.2605 <NOK=D3>
versus the dollar, a 10-day high.
The Chinese yuan rose 0.7% to 6.7330 <CNH=EBS>, its highest
since beginning of May 2019.
The British pound rose 0.3% against the U.S. dollar at $1.2957 <GBP=D3>,
reversing earlier losses, after a Financial Times report said
Britain and the European Union may have reached an agreement on
state aid after Brexit. Sterling also rose 0.1% against the euro
to trade at 90.78 pence <EURGBP=D3>.
(Reporting by Olga Cotaga; Additional reporting by Elizabeth
Howcroft, editing by Larry King)
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