Yen rises, US dollar falls on US mixed data

The US dollar slid on Thursday against major currencies in a choppy US trading session as data continued to indicate that the US economy is slowing down in the wake of multiple rate hikes by the Fed as investors and traders expect the central bank to pause or at least slow down its tightening cycle in the new year.

On the contrary, Japan’s yen rallied against the dollar as traders continued to bet the Bank of Japan will eventually shift away from ultra-loose monetary policy.

Thursday’s data showed that overall US housing starts declined 1.4% to a rate of 1.382 million units last month. Building permits dropped as well, down 1.6% o a rate of 1.330 million units.

Manufacturing activity in the Mid-Atlantic region retreated again in January. The Philadelphia Fed’s monthly manufacturing index rose to negative 8.9 this month from negative 13.7 in December, a larger improvement than economists in a Reuters poll had expected. The median estimate was for negative 11.

Conditions overall were labeled as the least negative in three months in a survey of goods producers that also showed inflation pressures – measured by the prices paid index – dropping to 24.5 in January from 36.3 last month. That was the lowest in nearly two-and-a-half years.

Initial claims for state unemployment benefits dropped 15,000 to a seasonally-adjusted 190,000 for the week ended Jan. 14. Economists polled by Reuters had forecast 214,000 claims for the latest week.
The housing market is in recession and regional Fed surveys are weak and are going to show that business activity is struggling. But the initial jobless claims report reinforces that this labour market remains strong. The labour market needs to break for inflation to continue go down.

In late morning trading, the dollar fell 0.24% against the yen to 128.45 yen, a day after the BOJ’s decision to stand pat on its ultra-loose monetary policy.

The euro is trading at $1.0829 at the time of writing. It hit a nine-month high of $1.089 on Wednesday before paring gains. European Central Bank President Christine Lagarde on Thursday said inflation is far too high and that the ECB will keep raising interest rates.