The dollar index (DXY00) Monday rose by +0.33% and posted a 5-week high. Higher T-note yields Monday strengthened the dollar’s interest rate differentials and supported the dollar. Also, concerns about China’s worsening debt crisis knocked the yuan down to a 6-week low against the dollar Monday. In addition, central bank divergence hammed the yen, which fell to a 9-month low against the dollar Monday.
Monday’s monthly survey of consumer inflation expectations from the New York Fed was dovish for Fed policy and negative for the dollar. The survey showed inflation expectations for one-year fell to 3.55% in July from 3.83% in June, the lowest in two years. Also, three-year inflation expectations fell to 2.9% in July from 3.0% in June.
EUR/USD (^EURUSD) Monday fell by -0.37% and posted a 5-week low. Dollar strength on Monday undercut the euro. Also, Monday’s report on German wholesale prices showed prices in July fell for the fourth consecutive month, which is dovish for ECB policy and bearish for EUR/USD.
The German Jul wholesale price index fell -2.8% y/y, the fourth consecutive month prices have declined year over year.
USD/JPY (^USDJPY) on Monday rose by +0.35%. The yen sank to a 9-month against the dollar Monday and has fallen for six consecutive sessions. Higher T-note yields Monday weighed on the yen. Also, central bank divergence is bearish for the yen, with the Fed, the BOE, and ECB raising interest rates while the BOJ continues to hold interest rates at record lows.
October gold (GCV3) Monday closed down -2.5 (-0.13%), and Sep silver (SIU23) closed down -0.035 (-0.15%). Precious metals prices Monday posted modest losses, with gold falling to a 6-week low and silver falling to a 1-1/2 month low. Monday’s rally in the dollar index to a 5-week high pressured metals prices. Also, higher global bond yields on Monday were bearish for precious metals. In addition, silver prices have a negative carryover from a slump in copper prices to a 6-week low Monday on concerns that worsening China’s debt crisis will curb economic growth and industrial metals demand.
Losses in precious metals were limited as liquidity concerns in China sparked some safe-haven buying of precious metals after a unit of Zhongzhi Enterprise Group, one of China’s top private wealth managers, missed payments on multiple high-yield investment products.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
