US Dollar Retreats on Thinning Trading Ahead of Thanksgiving

The dollar lost some of its yesterday’s gains on Thursday as trading volumes were lower ahead of the US thanksgiving holiday. The US currency jumped on Wednesday as a series of data releases in the world’s biggest economy showed a stable and steady growth.

Investors’ confidence towards the future of the dollar grew after durable goods orders increased by 4.8% in October, which is a bigger increase than expectations. Sentiments were further lifted by positive initial jobless claims data and a stronger anticipation for a higher fiscal spending under the administration of President-elect Donald Trump, which should also increase inflation rate.

A higher inflation rate in the USA will prompt the Federal Reserve to raise its interest rates faster, which tends to support the dollar against its peers. Officials from the central bank, including Federal Reserve Chair Janet Yellen, recently spoke in support for raising interest rates in the near future. This could be as soon as the Federal Open Market Committee holds its next meeting on December 14, according to estimates from futures prices done by the CME Group FedWatch tool.

The rapid climb of the greenback following Trump’s win in the US presidential election on November 9 has put emerging market currencies under a lot of pressure. The Chinese yuan, Indian rupee, and Philippine peso were inflected heavy losses against the dollar. Currency traders expect their respective issuing central banks to intervene to slow their declines.

EUR/USD was at 1.0553 as of 17:59 GMT after touching 1.0578 at 16:10 GMT, the pair’s highest level today. EUR/USD opened trading today at 1.0555 after going down to 1.0527 on Wednesday.

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