Dollar rally fades as stocks bounce, Treasury yields fall
US stocks were mostly lower on Thursday as worries about the Fed’s interest rate policy path reemerged after strong economic data. Weekly jobless claims came in fewer than expected, while second-quarter labor costs rose more than anticipated. The data added to fears that a resilient economy may make the central bank deliver another rate hike this year. Against this backdrop, the tech-heavy Nasdaq gave up 0.89% to fall for a fourth session in a row. The S&P 500 slipped 0.32%, while the Dow Jones bucked the trend to add 0.17%.
Following suit, Asian equities declined after Japan reported its economy grew less than earlier estimated in the second quarter. The data showed that he world’s third largest economy grew at a 4.8% annual pace in April-June, below the earlier estimate of 6% growth. After the release, Tokyo’s Nikkei 225 index dropped 1.21%, while the Kospi in Seoul finished just below the flat line. The Shanghai Composite index pulled back 0.18%, while the S&/ASX 200 in Australia fell 0.2%. Markets in Hong Kong were closed due to a tropical storm.
In Europe, stocks were slightly higher at the open amid a slightly better mood to start the session after a streak of seven consecutive sessions of losses. The pan-European Stoxx 600 index was up 0.3% in morning trade. On the data front, German inflation eased to 6.4% last month, in line with the preliminary report. US stock index futures are also trading a little higher in early pre-market deals as Treasury yields decline.
The dollar trades marginally lower across the board on Friday as 10-year Treasury yields are down to 4.220%. The USD index peaked at 105.16 during the previous session before sliding back below the 105.00 amid some profit-taking ahead of the weekend. Besides, risk sentiment seems to be improving cautiously after a bearish trading week in equity markets. Still, the greenback remains elevated as a strong US economy fuels rate hike expectations. After a pause, the buck may resume the ascent to confirm a break above the 105.00 barrier for the first time since March.