US dollar falls on month-end flows

US dollar loses ground to majors overnight

Despite a gloomy session for Wall Street equities, the US dollar still fell overnight, weighed down by the end-of-month and end-of-quarter flows by institutional investors. The dollar index fell through support at 94.00 to 93.87, finishing the day 0.40% lower. The dollar index has now lost nearly 100 points from its 94.75 highs last week, with a failure of 94.60 hinting that the US dollar short squeeze may have run its course for now.

That allowed the EUR, GBP, AUD and NZD to all rise by around 0.75% overnight. Despite this though, the majors are, for the most part, now trading mid-range on a weekly basis. With the US presidential debate behind us, and significant holidays in Asia for the rest of the week, currency markets are likely to stay in a holding pattern until the release of US Non-Farm Payroll data on Friday. That data will set the tone for the direction of the US dollar into next week. For now, it is a waiting game.

Asian currencies have weakened slightly today, as profit-taking lifts the US dollar slightly this morning. Like the majors though, and ahead of regional holidays, local currencies lack a strong momentum one way or the other. Expect continued range-trading into the US data on Friday.

Looking ahead, the next key data point will be Friday’s Non-Farm Payrolls data. With no sign of any follow-up fiscal stimulus package from Washington DC, despite multiple calls from the Federal Reserve, markets will be concerned that the US recovery may stall. Non-Farm Payrolls releases have been above the symbolic 1-million number for four successive months, but the forecast for the upcoming release stands at 900 thousand. A poor number on Friday will amplify those fears and could set markets up for a weak finish to the week.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

Latest posts by Jeffrey Halley (see all)