Dollar index slips but holds close to multi-year highs, SNB move weighs

Investing.com –

Investing.com – The dollar slipped lower against the other major currencies on Thursday, but remained close to 12 year highs as the greenback recovered from the previous session’s downbeat U.S. retail sales report.

The dollar regained some ground after falling broadly on Wednesday when a report showed the largest drop in U.S. retail sales in 11 months in December.

Official data showed that U.S. retail sales fell 0.9% last month after rising 0.4% in November.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.17% at 92.14, close to the fresh 12-year peaks of 93.15 hit overnight.

USD/CHF hit three-year lows of 0.7462 before retracing to 0.8769, down 13.95% and EUR/CHF hit lows of 0.7710, before pulling back to 1.0277, plummeting 14.57% for the day after the Swiss National Bank abandoned its exchange rate cap against the single currency and cut interest rates deeper into negative territory.

The SNB surprised markets by scrapping the 1.20 per euro exchange rate floor it imposed in September 2011, in a bid to stave off deflation and prevent the continued appreciation of the safe-haven franc against the single currency. The central bank also cut rates to minus 0.75%, from minus 0.25% before.

“This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate,” the SNB said in statement.

The move indicated that the SNB sees a high likelihood that the ECB will implement quantitative easing measures at its upcoming meeting next week.

Meanwhile, EUR/USD declined 0.63% at 1.1714, holding above 10-year lows of 1.1580 hit earlier in the session.

The single currency remained under pressure after an interim ruling by the European Court of Justice on Wednesday was seen as clearing the way for the European Central Bank to implement quantitative easing measures at its upcoming meeting on January 22.

The advocate general of the European Court of Justice, Pedro Cruz Villalon, advised judges to approve the ECB’s Outright Monetary Transactions program, a measure which was launched in 2012.

The dollar was lower against the safe-haven yen, with USD/JPY down 0.60% to 116.63, near Wednesday’s one-month lows of 116.05, while GBP/USD edged up 0.08% to 1.5246.

The commodity-linked currencies were broadly stronger. AUD/USD climbed 0.76% to 0.8211 and NZD/USD advanced 0.90% to trade at 0.7787. USD/CAD slipped 0.10% to 1.1936, hovering just below Wednesday’s more than five-year high of 1.2018.

Later in the day, the U.S. was to publish the weekly report on initial jobless claims as well as data on producer prices and manufacturing activity in the Philadelphia region.

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