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US Dollar Pulls Back at Thursday Open

Published on: 08/31/18 9:22 AM

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Category: Forex, Latest News, Trade, US News

After rising to yearly highs on Wednesday, the US Dollar has begun to pull back as stock prices hold steady for the day on Thursday.

As is normal when the US Dollar begins to fade, US equity markets opened the day higher while US yields began to rise. These figures demonstrate that traders are beginning to choose the market over the steady safety of the US Dollar and the stability of the US Treasuries. Financial analysts point to the rebounding of the Chinese Yuan and Turkish Lira as the primary reasons why the dollar is falling for the first time since August 8. The reversal of strength of the US Dollar compared to the Chinese and Turkish currencies has demonstrated a stronger tolerance for risk for investors.

After opening the day lower, the greenback bounced back slightly after both United States President Donald Trump and National Economic Council (NEC) Director Larry Kudlow praised the strength of the dollar, stating that the fortitude of the currency is a sign of confidence in the overall domestic economy. The coordinating remarks of both Trump and Kudlow this week also touched upon the administration’s guarantee of a new trade deal with Mexico. Kudlow took the opportunity on Thursday to state his belief that the new agreement is getting much closer to fruition.

Investors are also feeling skittish

Investors are also feeling skittish with the largely contentious trade talks between the US and China set to resume on August 22 when a Chinese vice minister will arrive at the White House to meet with the Treasury Department in an effort to forge an agreement. Although this news may play a small role in the value of the US Dollar, experts caution that the effects might end up being insignificant in the long run because the expectations of meaningful progression in the ongoing trade war are relatively low. In addition, a modification in Chinese policy has made shorting the offshore yuan more costly, leading to a pullback in the USD/CNH currency.

Despite today’s dip in the US Dollar, the DXY Index remains bullish. In other global currency news, the GBP rose to 1.2730, thanks in large part to a report of favorable retail sales. Thursday’s AUD also came in strong amidst reports of the planned resuming of trade talks between the US and China, as investors hope this will lead to a surge in risk assets and high beta currencies.