Dollar Holds Near Three-Week High

On Friday, the dollar remained near three-week highs, as better-than-expected retail sales data in the United States encouraged betting on the economy’s strength.

The euro had returned to positive territory but remained close to a three-week low at 1.1783.

Retail sales in the United States unexpectedly improved in August, climbing 0.7 percent from the previous month despite projections of a 0.8 percent drop. The Philadelphia Fed’s business sentiment survey also showed a significant rise. The statistics alleviated concerns about the U.S. economy following a tepid consumer inflation reading and weak job growth data earlier this month. Reignited expectations for the Federal Reserve to begin tapering its asset purchases sooner rather than later.

The more upbeat mood will be tested again later on Friday when the University of Michigan’s consumer confidence index is released. Last month, many investors were stunned by falling to a decade low due to lower-income gains and more significant inflation.

The Dollar Index

The dollar index was at 92.799, lower than the previous session but still close to the three-week high of 92.965.

On Friday, currency markets were mostly quiet, with traders hesitant to enter new prominent positions ahead of a slew of crucial central bank meetings next week. 

China Evergrande has an ongoing crisis and widespread belief that equities will see a correction. However, risk sentiment remains unexpectedly positive. There should be another quiet F.X. trading session before a hectic week of central bank meetings, According to ING strategists.

Currency

The Swiss franc continued to fall after reaching a five-month low against the U.S. dollar of 0.9280 francs.

The dollar surged to 109.84 yen, having gained 0.34 percent on Thursday. It recovered from a six-week low of 109.11 on Wednesday.

The yen has reacted only mildly to the ruling Liberal Democratic Party’s (LDP) leadership election, formally beginning on Friday ahead of a Sept. 29 vote. Because of the LDP’s legislative dominance, the party’s new leader will be Prime Minister.

The world’s top macroeconomic players do not anticipate significant policy shifts. The lack of movement in the yen demonstrates this, said Hiromichi Shirakawa, vice chairman and chief economist for Credit Suisse in Japan.

Following a 0.4 percent drop on Thursday, the Chinese yuan recovered marginally and was last up 0.1 percent.

The offshore yuan was trading at 6.447 to the dollar. It was under pressure from mounting concerns about China’s real estate sector. Investors fear China Evergrande may default on its coupon payment next week.

Nonetheless, the yuan was near its most substantial level in five years on a trade-weighted basis, both onshore and offshore. The British pound gained 0.1 percent to $1.38 per dollar.