Rising tensions between North Korea and the US led traditional safe havens to post gains today. Meanwhile, the few data releases during the day failed to cause much of a reaction in currency markets.
The Swiss franc, which as of recently was hitting headlines on continuing weakness, surged today on the back of safe haven demand. In particular, euro/franc fell to as low as 1.1259 after starting the day at 1.1447. It was last down 0.9% on the day. Dollar/franc also posted hefty losses – the pair was last trading at 0.9666, down 0.8%. Both pairs touched near two-week lows during today’s trading while a considerable portion of the franc’s earlier gains were retraced by late European trading hours.
Japan’s currency and gold, also perceived as safe havens, benefitted as well from the risk-off sentiment. Dollar/yen fell to a near two-month low of 109.55 during today’s trading. It afterwards gave up more than 50% of its daily gains to last trade above the 110 mark. In the meantime, gold rose to a near two-month high of $1276.07 an ounce. The precious metal was trading around $1271.50 during afternoon European trading hours, being up 0.9% on the day.
Out of the US, preliminary estimates showed second quarter non-farm productivity, which measures hourly output per worker, rising 0.9% on an annualized basis, above the 0.7% increase that was expected. The respective figure from the first quarter was revised upwards to 0.1% from zero before. Meanwhile, labor costs over the same period were kept under control as a result of improving productivity – they rose by 0.6%. Forecasts were for a rise by 1.2%, while costs during the first quarter were revised upwards to 5.4% from 2.2%. Dollar/yen moved slightly higher as the numbers hit the markets.
Later in the day, figures showed US wholesale inventories accelerating by 0.7% month-on-month in June, the most in six months. Both analysts’ projections and May’s rise stood at 0.6%. A significant part of the increase was attributed to rising automobile inventories as the sector is facing difficulties due to slowing demand, resulting in a supply glut. The greenback posted some losses relative to the yen as the data went public.
The dollar index, a broader gauge of dollar strength, rose to its highest since July 28 when it reached 93.89 in today’s trading. The index was last up 0.1% and close to its daily high. The US currency was up relative to the euro, though not by much – euro/dollar traded at 1.1745. Pound/dollar was more or less flat just below the 1.30 handle.
Turning to Canadian data, seasonally adjusted housing starts rose to 222.3 thousand in July from June’s 212.9 thousand. Expectations were for a reading of 205.0 thousand. Turning to building permits, those surprised to the upside in June, rising by 2.5% in contrast to analysts’ forecasts for a contraction by 2.0%. The rise was mostly due to increased plans for commercial buildings in Ontario. May’ respective figure was revised upwards to point to a 10.7% growth from 8.9% before. Forex market reaction within the first few minutes of the release of the above data was limited. The Canadian dollar was under pressure recently relative to its US counterpart due to falling oil prices. Dollar/loonie last traded marginally above the 1.27 handle, 0.3% up on the day and close to its daily high 1.2720 which constituted a near one-month high.
The Energy Information Administration’s report on US crude oil inventories showed stockpiles falling much more than expected. WTI rose upon immediate release of the data, though not by much while it soon after reversed course to head lower. It was last 0.1% down at $49.11 a barrel. Brent crude was flat at $52.16. the fall in price could have been attributed to rising gasoline inventories.
The Reserve Bank of New Zealand will be completing its meeting during afternoon US trading hours. Kiwi/dollar was slightly down at 0.7320 after hitting a three-week low of 0.7307 earlier in the day.
