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Dollar Bounces To Start H2

Marc Chandler profile picture
Marc Chandler


  • USD bounces smartly, but not on fresh positive US developments.
  • European and Asian economic data were constructive.
  • The greenback's bounce is modest and has not violated key chart points.

The beleaguered US dollar is enjoying a respite from the selling pressure that pushed it lower against all the major currencies in the first six months of 2017. A measure of the dollar on a trade-weighted basis fell about 5% in the first half after appreciating nearly 8% in Q4 16.

Paradoxically, the dollar's recovery today has not been sparked by a new fundamental development but seems to be a reflection of sentiment and a cautiousness about the proximity of key chart points. In fact, the economic data that has been reported today, which includes Caixin manufacturing PMI for China, Japan's Tankan Survey and the eurozone's manufacturing PMI, all came in stronger than expected. The UK manufacturing PMI was an exception and as it fell more than expected. However, overall, the fact that the dollar is broadly higher suggests that the market may have already discounted the strengthening global macro picture.

For the record, China's Caixin manufacturing PMI rose to 50.4 from 49.6. It is the strongest reading since March. Output rose to 50.6 from 50.2. The improvement seen in the official measure speaks to the larger businesses and exporters. The Caixin measure says that the economic strength is also being seen in the domestic economy among smaller businesses as well.

Japan's Tankan Survey showed improvement across the board: large and small manufacturers and non-manufacturers. Of particular interest, capex plans jumped dramatically. Large businesses intend to boost capital spending by 8% after a 0.6% increase was planned in Q1. The median expected a 7.2% gain. Separately, the LDP was trounced in the Tokyo election. It may take a little time for the results to impact policy. A cabinet reshuffle and prospects for a supplemental budget, a typical response may be forthcoming. Finance Minister Aso is consolidating his power among LDP factions, and it is out of Aso's faction that a rival to Abe

This article was written by

Marc Chandler profile picture
Marc Chandler has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. A prolific writer and speaker he appears regularly on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. In 2009 Chandler was named a Business Visionary by Forbes. Marc's commentary can be found at his blog (www.marctomarket.com) and twitter www.twitter.com/marcmakingsense

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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