Dollar Weakens as Equities and Treasury Yields Fall

The dollar limped into Thursday’s North American close suffering its biggest one-day loss against the yen since September. Softer U.S. equity prices and lower Treasury yields overshadowed mostly upbeat U.S. economic data that included a significant decline in first time unemployment claims and a pair of buoyant indices on the services sector.

The dollar was already on the defensive as the North American session kicked off after China raised its interbank borrowing rate for offshore yuan. This triggered a flight-to-safety into the Japanese yen amid concerns that the measure to halt yuan speculation was a pre-emptive move by China to stem capital outflows from the mainland. The move drove USD/CNY to a two-month low overnight and USD/JPY to key support at the 62% Fibonacci retracement of the June 2015 high and July 2016 low of 126.09 and 98.73, respectively. And although the dollar bounced higher during the European session, it spent most of the North American trade clinging to the 115.55/115.64 level, closing 1.45% lower.

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