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US Dollar Weakens on Disappointing Data, Trade Uncertainty

October 16, 2019 at 19:35 by Andrew Moran

Closeup of several USD100 notesThe US dollar is trading lower against multiple currency rivals midweek, driven by disappointing economic data and continued uncertainty surrounding US-China trade relations. Still, the consensus is that the greenback will remain one of the strongest currencies over the next 25 years, competing with the Chinese yuan and the euro.

According to the US Census Bureau, retail sales tumbled 0.3% in September to a 12-month rate of 4.1%, following a better-than-expected 0.6% jump in August. This is the first decline since February. Retail sales fell short of market forecasts due to lower new motor vehicle, building material, and online sales.

August business inventories were flat as stocks at manufacturers were unchanged and supplies at retailers dipped 0.1%.

In the week ending October 11, mortgage applications rose 0.5%, reports the Mortgage Bankers Association (MBA). Refinance applications advanced 3.6%, but new home applications declined 4.1%. The average 30-year mortgage application rate averaged 3.92% for the week ending October 11.

Investors will now look at housing, jobs, and industrial and manufacturing output, which are scheduled for release on Thursday.

Meanwhile, a UBS survey of sovereign institutions shows that the US dollar will remain the world’s leading reserve currency for the next 25 years. Despite recent decreases in global reserves and an eventual greater share in euro and yuan holdings, analysts say the buck will continue to account for about two-thirds of international currency reserves.

Massimiliano Castelli, the head of strategy and advice in global sovereign markets at UBS Asset Management, told Reuters:

In the end, what we think will actually happen over the next 25 years is that as we move on, we will have a world where we will have three important currencies: the dollar, euro, and renminbi. Over the last 25 years, the dollar’s share has oscillated between 60%-65% of currency reserves. I don’t see any reason why we cannot see the dollar represent 50% of global reserves, the euro around 20%-25%, and the renminbi having 5%-10% and becoming a third reserve currency.

The US Dollar Index plunged 0.31% to 97.99, from an opening of 98.32.

The USD/CAD currency pair dropped 0.02% to 1.3196, from an opening of 1.3200, at 19:28 GMT on Wednesday. The EUR/USD surged 0.42% to 1.1077, from an opening of 1.1034.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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