By Chuck Mikolajczak
NEW YORK (Reuters) – The dollar fell in volatile trading on Thursday after a slew of U.S. data pointed to a relatively strong economy, while the Swiss franc rose after the country’s central bank cut interest rates by 25 basis points.
The US dollar began to pare its losses after data showed that weekly jobless claims in the United States fell by 4,000 to a four-month low of 218,000, below the expectations of economists polled by Reuters, which were 225,000.
In addition, other reports showed that corporate profits increased at a stronger pace than initially expected in the second quarter, while GDP grew at an unrevised 3%.
A gauge of new orders for key U.S. manufactured capital goods rose unexpectedly in August, although business spending on equipment appeared to have waned in the third quarter.
“It looks like very good news for the dollar,” said Joseph Trevisani, senior analyst at FX Street in New York.
“Again we have this dichotomy between the Fed cutting rates and the economy basically growing at 3% or more, so the market doesn’t quite know what to do with that.”
The dollar, which measures the greenback’s value against a basket of currencies including the yen and the euro, fell 0.33 percent to 100.61 after rising to 100.95 in the session. The euro rose 0.34 percent to $1.117.
The Federal Reserve recently signaled a shift in focus away from inflation and toward maintaining a healthy labor market, but it cut interest rates by a larger-than-usual 50 basis points last week.
The market is pricing in at least a 25 basis point rate cut at the Fed’s Nov. 6-7 meeting, with a 52.1% chance of another big cut of about half a percentage point, according to CME Group’s (NASDAQ:) FedWatch tool.
Swiss interest rate cut
The dollar fell 0.27% against the Swiss franc to 0.848 francs after the Swiss National Bank cut interest rates by 25 basis points, following the moves of the Federal Reserve and the European Central Bank, leaving the door open for further rate cuts as inflation slows sharply.
Goldman Sachs analysts said the SNB’s rate cut was “driven by lower inflationary pressures, driven, among other things, by a stronger franc” and they expect another 25 basis point cut at the central bank’s December meeting given its dovish guidance and new inflation expectations.
A number of U.S. central bank officials spoke on Thursday, though several, including Federal Reserve Chairman Jerome Powell, declined to comment on monetary policy.
U.S. Treasury Secretary Janet Yellen said labor market and inflation data suggest the U.S. economy is on a “soft landing” path, but the “last mile” in efforts to tame inflation is about lowering housing costs.
The Japanese yen rose 0.01 percent against the dollar to 144.72 yen. Minutes from the central bank’s July meeting showed policymakers divided over how quickly the central bank should raise interest rates again, highlighting uncertainty over the timing of the next increase in borrowing costs.
The pound rose 0.5% to $1.3391.