Dollar Rises as Yen Hits 38-Year Low Post-Presidential Debate

The US presidential debate between Biden and Trump saw Trump’s comments on tariffs influence market expectations, causing the dollar to rise against the Mexican peso and other trade-sensitive currencies. The yen fell to a 38-year low, prompting speculation about possible intervention from Japanese authorities. Analysts are focused on the upcoming US core PCE price index release, expected to show a 2.6% annual increase for May.

Equities

The FTSE 100 fell for the third consecutive day on Thursday, closing 0.6% lower at 8,179.68 points. GSK dropped 4.6% after the U.S. CDC narrowed the recommendation for its RSV vaccine, affecting the pharma sector. The automobile and parts sector also declined 1.4% after industry data showed an 11.9% year-over-year drop in Britain's car output for May.

Burberry fell 6.4% as it traded without entitlement to its latest dividend payouts. In contrast, DS Smith jumped 15.7% after Suzano terminated talks to buy International Paper. The FTSE 250 edged up 0.2%, with Moonpig Group leading gains, soaring 15.2% following its full-year results.

In the US, stocks closed nearly unchanged as investors awaited fresh inflation data. The Nasdaq managed a slight gain of 0.3%, closing at 17,858.68, while the S&P 500 and Dow Jones each rose 0.09%, closing at 5,483.06 and 39,164.33, respectively.

Walgreens Boots Alliance slumped 22.16% after cutting its 2024 profit forecast and announcing plans to close more underperforming U.S. stores. Levi Strauss tumbled 15.4% after missing second-quarter revenue expectations.

Amazon rose 2.19% after reaching a $2 trillion market value for the first time. Alphabet and Meta Platforms also saw gains, up 0.83% and 1.25%, respectively, as U.S. Treasury yields slipped. Micron fell 7.11% after its in-line fourth-quarter revenue forecast disappointed investors. Nvidia continued its recent turbulent ride, dropping 1.90%.

Forex & Commodities

In currency markets, the dollar was strong, eyeing a monthly gain of 1.3% against a basket of currencies. The Australian dollar fell 0.35% to $0.6624, while the euro dipped 0.13% to $1.0690, heading for a monthly decline of roughly 1.4%. Political turmoil in the eurozone, including France's upcoming snap election, weighed on the euro.

Overall, the US market remained in a holding pattern as investors awaited the release of the monthly personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, due on Friday. The hope for rate cuts was buoyed by data showing a continued slowdown in economic activity, with new orders for U.S.-manufactured capital goods unexpectedly falling in May and core durable goods orders declining by 0.1%. Weekly jobless claims fell slightly to 233,000, missing expectations of 236,000, while U.S. economic growth in the first quarter exceeded estimates.

The yen tumbled to 161.27 per dollar, its weakest since 1986, before recovering slightly. It has fallen about 2.25% this month and over 12% for the year against the dollar, due to stark interest rate differentials between the U.S. and Japan. This has maintained the yen's appeal for carry trades. Despite interventions by Japanese authorities, the yen remains weak, benefiting the Nikkei, which last rose 0.4% and aimed for a monthly gain of 2.6%.

In economic data, core consumer prices in Tokyo rose 2.1% in June from a year earlier, presenting a challenge for the Bank of Japan as cost pressures from the weak yen keep inflation above its 2% target but hurt consumption. Japan's government appointed financial regulation expert Atsushi Mimura as its top currency diplomat, replacing Masato Kanda, who managed significant currency interventions this year.

Gold struggled under the firm dollar, falling 0.13% to $2,324.40 an ounce. In contrast, Brent crude oil futures rose 0.61% to $86.92 a barrel, and U.S. West Texas Intermediate crude futures gained 0.67% to $82.29 per barrel.