The dollar rose for a second day after retail sales gained more than forecast last month, adding to speculation the Federal Reserve will move to trim its $85 billion of monthly asset purchases at a meeting next week.
“The retail sales are clearly helping the dollar,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said. “The dollar could bounce back against some of the currencies that have been doing particularly well, like the euro and sterling, going into the FOMC, as markets cut back on risk.”
U.S. retail sales in the U.S. climbed 0.7% in November, the most since June, after a 0.6% advance in October that was larger than previously reported, Commerce Department figures showed. The median forecast of economists called for a 0.6% advance.
Negative global trading sentiment spurred by tapering fears continued to weigh on the markets. Most main currencies also headed for weekly losses after solid U.S. jobs data last week and a budget deal in Washington fueled speculations the Federal Reserve could reduce its asset purchases next week.
EURO
The euro fell from almost a six-week high versus the dollar as data showed industrial production in the 17 nations that share the currency contracted in October, highlighting the uneven nature of the economic recovery.
Data released showed the Eurozone industrial output fell 1.1% in October versus a 0.3% rise expected, while YoY it grew 0.2% well below the 1.1% increase expected.
ECB expects Eurozone GDP to fall 0.4% this year and pick up to 1.1% growth in 2014 and 1.5% in 2015.
FRANC
Swiss franc still holds within the range versus the US dollar.
Thursday SNB left interest rates unchanged:
-Libor target remains at 0-0.25%;
-will maintain EURCHF peg at 1.200;
-prepared to buy fx in unlimited quantities;
-2013 growth forecast unch at 1.5-2.0%;
-2014 growth around 2.0%;
-2013 inflation forecast -0.2% unch;
-2014 forecast +0.2% vs +0.3% prev;
-2015 forecast +0.6% vs +0.7% prev.
The UBS analyst team opened a long USD vs. short CHF position, within opportunistic short-term trading recommendations. They explained the reasons underlying this trade.
"This is opened at 0.8888 with a target at 0.9250 and a stop loss at 0.8700".
"We think that EURUSD and USDCHF are range bound and that the USD weakness has gone far enough".
"The ECB, which has cut rates when EURUSD was close to this level, is likely to speak up soon".
"The Fed is about to taper and US budget issues improved strongly in the last days".
YEN
The U.S. dollar climbed on Friday to its highest level against the Japanese yen in more than five years, as the two nations’ monetary policies held the market’s attention ahead of central-bank decisions due out next week.
The Japanese currency fell earlier as the yield difference between Treasuries and Japanese bonds traded at almost the widest since April 2011. The euro weakened as European Central Bank policy maker Peter Praet said the region’s recovery is “fragile.” The Federal Reserve and Bank of Japan are scheduled to hold policy meetings next week.
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