Dollar steadies after pre-Thanksgiving breakout

Thu Nov 24, 2016 8:38am EST
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By Patrick Graham

LONDON (Reuters) - The dollar steadied after breaking past more of last year's peaks against the euro on Thursday, with only the March 2015 high of $1.0457 standing in the way of a push toward parity that banks are again saying is on the cards.

With U.S. markets out for the Thanksgiving holiday, trade was already thinning out after the dollar set a series of new landmarks in early trade in Europe, extending its surge after another strong batch of U.S. economic data on Wednesday.

The dollar hit an eight-month high against the yen and an almost 14-year high against a basket of currencies that measures its broader strength.

It also notched up new record highs overnight against a raft of emerging market currencies including the rupee INR=, the lira TRY= and China's offshore yuan. CNH=D3

"It is tempting to take profit given the U.S. will be absent later, but there is no change in the fundamental view on the dollar," said Valentin Marinov, head of G10 strategy at Credit Agricole in London.

"It does feel like clients are steadily becoming more confident in the dollar rally. They have focused on the positives from the U.S. election and the data we have seen suggests there is more room for U.S. yields to rise."

The dollar's surge is based largely on a belief that Donald Trump's presidency will witness a bump in inflation that will drive U.S. interest rates higher and potentially see substantial dollar capital brought home by U.S. corporates.

That would appear to play into the hands of European, Japanese and Chinese policymakers, who hope weaker currencies will help deal with their respective problems with growth.   Continued...

People look at the exchange rate at a moneychanger displaying a poster of U.S. dollar bill, Chinese Yuan and Malaysia Ringgit in Singapore August 24, 2015. REUTERS/Edgar Su