The US dollar surged to a near 14-year high before pulling back on Thursday, clocking up records against other top world currencies and unnerving emerging markets.
Stronger data from the world’s biggest economy underpinned the greenback’s gains, which were further amplified by thinner volumes as US traders stayed away for the Thanksgiving holiday.
It was off its highs as Europe wound down but had earlier pushed its way past more of last year’s peaks against the euro to reach US$1.0515, with only the March 2015 high of US$1.0457 standing in the way of a drive toward parity.
The yen skidded to an eight-month low and China’s yuan to an 8-1/2 year low, while the highly sensitive Turkish lira and Indian rupee hit new troughs as warning lights flashed in emerging markets.
“There doesn’t seem to be anything stopping US yields going higher in the near-term so I think people are going to stay on the dollar trend,” Michael Metcalfe, State Street Global Markets’ head of global macro strategy, said.
“The only risk to this are that the dislocations in markets outside of the US, particularly in emerging markets, get to a point where they start to feed back into concerns [for the Federal Reserve as it looks to raise interest rates],” he said.
In contrast to all the FX noise, European shares saw a broadly quiet day, with most of the main bourses inching up on gains from chemical and insurance sector stocks but capped by weaker banks.
German business confidence data showed firms remained unfazed, for now at least, by the US election win for Donald Trump and the political uncertainty bubbling in the eurozone.
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