020 7898 0500The dollar pushed higher on Wednesday against other major currencies due to a stronger-than-expected US non-farm productivity report, combined with a rise in the ADP employment figure, which rose from 177,000 in July to 190,000 last month. Also on the fundamental data side, there were mixed views on US factory orders data, as there was an increase by 0.4% in July – although this showed growth, it missed the expected growth level of 0.9%.
In a bid to curb speculation and volatility after the recent devaluation of the yuan, China’s central bank will require reserves (20% ratio of nominal value of forwards and swap contracts, 10% of nominal value of principal options) to be set aside for purchases of all currency derivatives from October. This, as well as previous moves to reduce depreciation pressure, cast doubt as to the People’s Bank of China’s intentions to seriously move to a flexible currency regime, or whether it has re-imposed a de facto peg to the US dollar, set at a different level.
The most significant US data out today is the August trade balance figure. Investors will also be looking ahead to Friday’s August US jobs report, which will help to provide a clearer picture of the strength of the job market and the likelihood of a near-term interest rate hike by the Federal Reserve. The US dollar index (which measures greenback’s strength against a trade-weighted basket of six majors) was up yesterday by 0.52%, at 95.88.
