Dollar Index Falls as US ISM Manufacturing PMI Hits 2-Year Low
Early on September 1, the US dollar index fell down to the day’s low of 95.19 after reports of weak Chinese PMI numbers.
China, the manufacturing hub of the world, has been recording sluggish growth. China’s August PMI numbers were at 47.3, below the crucial level of 50.
The U.S. Bureau of Labor Statistics published its data on nonfarm payrolls and unemployment claims on September 4. The dollar spiked to 96.57 at the time the data were released.
The annual Jackson Hole Symposium attracts a high-profile audience including finance ministers, central bankers, and academics from around the world.
The Conference Board Consumer Confidence Index for August came out at 101.5. It was a much higher level than the previous month’s reading of 91.
The G10 currencies were impacted positively as the US dollar index dropped in value in the two weeks ending August 21, 2015.
The Chinese yuan devaluation has been the major driver of the massive volatility in the foreign exchange markets over the last two weeks.
The US dollar index was trading nearly flat as the market as it awaited the Fed minutes, which were released on Wednesday, August 19.
This week has more major data coming out than last week, with the FOMC minutes of August 19 leading the pack.
The US dollar index rose for the second consecutive session on August 14, 2015, as the US Producer Price Index (PPI) rose by 0.2% on a month-over-month basis.
On August 13, 2015, US retail sales came in at expected levels for July. The increase in the retail sector was broad-based.
The US Dollar Index fell by nearly 1% as the basket of currencies that the US dollar is weighed against posted gains.
The dollar could take a breather if the economy remains weak. If the dollar rally stalled it could be a blessing. It could give exporters and large-cap companies relief.
Most analysts feel the dollar could strengthen further. You may consider currency-hedged ETFs while investing internationally.
The biggest names in the technology sector are also the ones that have been hit hardest by the currency war. The include IBM, Oracle, Microsoft, and Xerox.
Multinational retailers such as McDonald’s, with 68% non-US revenues, and Walmart, with about 28%, stand to lose in the currency wars.
The industrial sector accounts for about 12.5% of total US GDP. It’s also a main source of demand for goods and services in other sectors of the economy.
The extent of foreign-exchange risk exposure matters. In this series, we’ll reveal the impact that currency wars can have on specific sectors of an economy.
A stronger dollar hurts US large-cap companies. The massive gain is mainly due to the divergence in the policies of major central banks.
A stronger dollar is a headwind for export-oriented stocks. The US economy is relatively robust.