The dollar index (DXY00) on Thursday gave up an early advance and finished little changed, up only +0.01%. The dollar Thursday initially climbed to a 6-1/2 month high on carryover support from Wednesday when the FOMC signaled one more +25 bp rate hike this year and projected the fed funds rate next year +50 bp higher than they projected back in June. Also, Thursday’s slump in stocks boosted liquidity demand for the dollar. In addition, soaring T-note yields Thursday strengthened the dollar’s interest rate differentials. The dollar gave back most of its gains as the yen strengthened ahead of the results of Friday’s BOJ meeting.
Thursday’s U.S. economic news was mixed for the dollar. On the positive side, weekly initial unemployment claims unexpectedly fell -20,000 to a 7-1/2 month low of 201,000, showing a stronger labor market than expectations of an increase to 225,000. Also, Aug leading indicators fell -0.4% m/m, a smaller decline than expectations of -0.5% m/m.
