By Joseph Adinolfi, MarketWatch
Swiss franc weakened as rumors of a new SNB currency cap
swirled
NEW YORK (MarketWatch) -- The U.S. dollar hit an 11-year high
against the euro Wednesday after pushing through a key technical
threshold, shrugging off a weaker-than-expected ADP jobs report and
strong eurozone reports.
The euro (EURUSD) tumbled to $1.1073, its lowest level since
late 2003.
The market has dumping euros for the past week despite a string
of upbeat eurozone data that could inspire the European Central
Bank to revise its growth expectations upward at its policy meeting
on Thursday, several analysts have said.
Wednesday's moves were driven by a combination of eurozone bond
investors, who are already facing record-low yields in Europe,
searching for yield elsewhere, and the expectation that the Fed
will be the first among its peers to raise interest rates.
"We bounced off $1.1150 a few times in the last few days and I
think the market may have thought if we moved through it, that
would be a major break," said Steve Englander, global head of G10
FX strategy at Citigroup Inc.
The European Central Bank is expected to make its first EUR60
billion purchase of private and public eurozone debt after
Thursday's meeting.
"This is sort of a continuation in the selling we've seen all
week," Englander said. "Hawkish Fed expectations combined with the
sense that once the ECB starts buying, there's just not going to be
enough bonds out there."
Eurozone retail sales data released Wednesday morning came in
significantly stronger than expected, growing 1.1% month over
month, compared with a consensus estimate of 0.4% growth from
analysts polled by The Wall Street Journal. In other eurozone data,
the composite purchasing managers index for February came in at
53.3, up 0.7 point from January's reading, but slightly below the
consensus estimate.
Meanwhile, the dollar inched lower against the yen after ADP
reported that private-sector employment grew by 212,000 jobs
(http://www.marketwatch.com/story/private-sector-adds-212000-jobs-in-february-adp-2015-03-04-8912123)
in February, down from a revised reading of 250,000 jobs in
January.
The dollar (USDJPY) inched higher against the yen after a
measure of February service-sector activity in the U.S. came in
higher than analysts had expected. The dollar traded at Yen119.70,
compared with Yen119.67 late Tuesday.
The dollar held its gains in afternoon trading as the release of
the Fed's beige book showed that a strengthening dollar and the
recent oil-price collapse has weighed on export demand in several
sectors --
(http://www.marketwatch.com/story/lower-oil-price-stronger-dollar-impact-felt-across-country-beige-book-2015-03-04)most
notably manufacturing, agriculture and energy exploration.
Service-sector activity in the U.K. missed the consensus
estimate, sending the pound lower against the dollar for the fourth
straight session. The pound (GBPUSD) traded at $1.5258, compared
with $1.5362 Tuesday.
The ICE U.S. Dollar Index(DXY), a measure of the dollar's
strength against six of its largest trading partners' currencies,
was 0.62% higher at 95.9750.
Swiss franc cap rumors?
The Swiss franc weakened against the dollar for the fifth
straight session Wednesday, as a rumor circulated that the Swiss
National Bank was considering a re-introduction of a cap on the
value of the franc. The selling continued after Swiss authorities
denied the rumor.
The franc (CHFUSD) traded at $1.0379, compared with $1.0405 on
Tuesday. Matthew Weller, senior technical analyst at Forex.com,
said that the dollar is likely to continue strengthening against
the franc in the long-term, cautioning investors to ignore
short-term dips.
"Even now that the rumor has since been denied, the franc
remains weaker on the day, suggesting that traders were just
looking for any excuse to buy [dollars in exchange for francs],"
Weller wrote.
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