On Thursday, the US dollar declined because investors were on edge, with the end of the year drawing close and all the initial optimism about China’s loosening policy fizzled out.
Markets were also processing the latest US jobless claims reading and were weighing the impact of the reopening of China’s economy, which has seen a massive surge in infections.
Market analysts said that China would prove to be key in 2023 in terms of how the global economy is going to fare.
COVID policy
After China lifted its quarantine rule for inbound travelers, which will go into effect on January 28th, Japan, the United States, India and other countries announced that travelers from China would require COVID tests.
According to experts, global growth will benefit if China is able to bounce back from the slowdown, but it would also push up energy demand and this means higher prices.
On Wednesday, the US dollar had hit a high of one week against the Japanese yen at 134.40, but it once more dropped to a session low the following day.
There was a 1.1% decline in the US dollar against the Japanese yen, which saw the currency reach 133.005.
Dollar drops
It was not just the yen against which the greenback recorded declines, as it did the same with the Swiss franc. In fact, it came down to as low as 0.9208, which is the lowest it has been since March 31st.
There was a 0.71% drop in the US dollar against the Swiss franc, which saw it close the day at 0.922. The US dollar index, which measures the currency against a basket of others, also fell for the day.
It dropped by 0.479%, after climbing about 0.18% in the last session, so it ended the day at a value of 103.840.
This drop could be a reaction to the release of the US jobless claims data on Thursday.
The data
According to the Labor Department, the week that ended on December 17th saw a rise in the number of people who got benefits after the aid of one week, as it reached 1.710 million.
Since early October, there has been a rise in these continuing claims, which are considered a proxy for hiring.
Market analysts said that when such a pace of continuing claims is seen, it is an indication of an overall downturn. However, they also warned against relying too much on price movements.
This is because trading volumes are low in the markets for now, as the year is drawing to a close. There are liquidity issues at the end of a year.
Therefore, it is likely that the market could be reacting more to incoming data than it usually would when the liquidity situation is normal.
Moreover, investors are more focused on the information they will get to see in 2023, as the markets are currently in drifting mode and traders are likely to return after the turn of the year.
There was a 0.42% rise in sterling against the US dollar, which saw it reach 1.207, after it had declined by 0.11% a day earlier.
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