Dollar hits six-week high on solid data, safe haven demand

The dollar rose to a six-week high on Thursday as data showed a still-solid US economy while safe haven demand on concerns about rising Middle East tensions and the impact of a dockworker strike also boosted the currency.

The greenback has additionally benefited from more dovish central bank expectations being built into currency peers, including the euro, sterling and Japanese yen.

Data on Thursday showed that US services sector activity jumped to a 1-1/2-year high in September amid strong growth in new orders, though its measure of services employment fell, consistent with a slowdown in the labor market.

"Today is an example of how quickly the US dollar can recover," said Juan Perez, director of trading at Monex USA in Washington. While Thursday's data was "a little contractionary," the US. remains the envy of other countries, he added.

Other data on Thursday showed that the number of Americans filing new applications for unemployment benefits rose marginally last week, but Hurricane Helene's rampage in the US. Southeast and strikes at Boeing BA.N and ports could distort the labor market picture in the near term.

The dollar index was last up 0.37per cent at 102.03 and reached 102.09, the highest since Aug. 19.

Improving economic data and more hawkish comments from Federal Reserve Chair Jerome Powell on Monday have reduced expectations that the Fed will cut rates by another 50 basis points at its Nov. 6-7 meeting.

Traders are now pricing in a 34per cent probability of a 50 basis point cut, down from 49per cent a week ago, the CME Group's FedWatch Tool shows.

Friday’s jobs report for September is the next major US. economic release that may sway Fed policy. Economists polled by Reuters expect 140,000 job additions, while the unemployment rate is anticipated to stay steady at 4.2per cent.

The US. currency has benefited from a safety bid after Israel was attacked by Iran on Monday in a strike that raised fears the oil-producing Middle East could be engulfed in a wider conflict.

Oil prices rose on Thursday on concerns that crude oil flows from the region could be disrupted.

Long lines of container ships also appeared outside major US. ports on Thursday as the biggest dockworker strike in nearly half a century entered its third day, preventing unloading and threatening shortages of everything from bananas to auto parts.

"The US. dollar is a safe haven in the midst of chaos," said Perez. "In the post-pandemic world the number one concern was, can we rebuild healthy supply chain logistics? And this headline news completely destroys that stability and health."

The euro has fallen on increasing expectations that the European Central Bank will cut rates at its Oct. 17 meeting as inflation recedes.

It fell 0.28per cent to $1.1014 and got as low as $1.1008, the lowest since Sept. 12.

Sterling tumbled after Bank of England Governor Andrew Bailey said that the British central bank could move more aggressively to cut interest rates if inflation pressures continue to weaken, thought he said the conflict in the Middle East could push up oil prices.

The British pound was last down 1.19per cent at $1.3109 , the lowest since Sept. 12.

The dollar also hit a six-week high against the yen as Bank of Japan board member Asahi Noguchi said the Japanese central bank must move cautiously and slowly to avoid hurting the economy.

It comes after Prime Minister Shigeru Ishiba said on Wednesday that Japan is not in an environment for an additional rate increase.

The dollar was last up 0.18per cent at 146.73 and earlier reached 147.25, the highest since Aug. 20.

In cryptocurrencies, bitcoin fell 1.25per cent to $60,147.