Forex Today: US Dollar climbs higher as focus shifts to PMI data
Here is what you need to know on Friday, November 22:
Following a quiet European session, the US Dollar (USD) regathered its strength in the second half of the day on Thursday and continued to push higher early Friday, reaching its highest level since October 2023 above 107.00. S&P Global will release preliminary November Manufacturing and Services Purchasing Managers Index (PMI) data for Germany, the Eurozone and the UK.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.68% | 0.39% | 0.46% | -0.76% | -0.51% | 0.55% | -0.10% | |
| EUR | -0.68% | -0.12% | -0.11% | -1.32% | -1.03% | -0.02% | -0.67% | |
| GBP | -0.39% | 0.12% | 0.04% | -1.20% | -0.92% | 0.11% | -0.55% | |
| JPY | -0.46% | 0.11% | -0.04% | -1.23% | -0.90% | 0.14% | -0.50% | |
| CAD | 0.76% | 1.32% | 1.20% | 1.23% | 0.28% | 1.32% | 0.66% | |
| AUD | 0.51% | 1.03% | 0.92% | 0.90% | -0.28% | 1.03% | 0.37% | |
| NZD | -0.55% | 0.02% | -0.11% | -0.14% | -1.32% | -1.03% | -0.65% | |
| CHF | 0.10% | 0.67% | 0.55% | 0.50% | -0.66% | -0.37% | 0.65% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The data from the US showed on Thursday that the weekly Initial Jobless Claims declined to 213,000 from 219,000. In the meantime, Existing Home Sales increased by 3.4% on a monthly basis in October. In addition to these upbeat data releases, hawkish comments from Federal Reserve (Fed) officials further supported the USD during the American trading hours. In the European morning on Friday, US stock index futures trade marginally lower, while the benchmark 10-year US Treasury bond yield holds steady at around 4.4%.
In the Asian session on Friday, Statistics Bureau of Japan announced that the National Consumer Price Index (CPI) rose 2.3% on a yearly basis in October, down from 2.5% in September. Meanwhile, Reuters reported that Japan is preparing a fresh stimulus package valued at 13.9 trillion yen ($89.7 billion), aiming to mitigate the financial strain on households caused by rising prices. After losing more than 0.5% on Thursday, USD/JPY edges higher early Friday and was last seen trading near 155.00.
EUR/USD turned south in the American session on Thursday and broke below 1.0500. The pair struggles to stage a rebound early Friday and trades at around 1.0470.
GBP/USD lost 0.5% on Thursday and extended its slide during the Asian trading hours on Friday. At the time of press, the pair was trading at its weakest level since May below 1.2600.
The data from Australia showed that the Judo Bank Composite PMI declined to 49.4 in November's flash estimate from 50.2 in October. AUD/USD came under modest bearish pressure after this data and was last seen trading slightly below 0.6500, where it was down 0.3% on the day.
Gold extended its weekly rally and closed the fourth consecutive day in positive territory on Thursday. XAU/USD preserves its bullish momentum in the European morning on Friday and continues to advance toward $2,700.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.