Dollar Lower As China Data Lifts Sentiments

The dollar weakens against other major currencies, except the yen, as risk sentiments are lifted mildly by positive manufacturing data from China. The HSBC china manufacturing PMI rose to 50.4 in November, comparing to 49.5 in October. That's the first expansion reading in 13 months and signals mild growth in the sector.

HSBC said in a statement that the reading confirms recovery continues to gain momentum towards the year end, even though it's still the early stage and remains fragile. It said that the data still calls for continuation of policy easing. Asian equities are broadly higher with Australia all ordinaries up over 1.1% and HK HSI up 0.7% at the time of writing. Nikkei is also supported by weakness and yen and is up over 1%.

Technically, note that USD/CHF has taken out a minor support level at 0.9380 while GBP/USD also took out a minor resistance at 1.5957. Both argues that dollar might have at least topped in near term. While EUR/USD is still held below 1.2882 minor resistance, close attention would now be paid to this level to see if EUR/USD aligns itself with other dollar pairs. Nonetheless, USD/CAD and AUD/USD are both stuck in familiar range though.

The yen's sell-off accelerated overnight after LDP leader Abe, the most likely candidate to succeed Noda as the next prime minister after December 16 election, pledged to achieve 3% economic growth and set a 2% inflation target. Analysts are perceiving the targets as implication of extremely aggressive policies that go beyond quantitative easing, but also a targeted yen weakness policy. There were even talk that USD/JPY could go back to above 100 level should LDP be follow through in the implementation of the policies.

After brief dip following the disappointing EcoFin meeting on Greece, the euro quickly regained ground. Markets seems to be rather unworried about the delay as most analysts expect that Greece will eventually get its bailout fund. A further meeting is scheduled for November 26, next Monday, between eurozone finance minister on the issue. Indeed, German Chancellor Merkel said that there are "chances to get a solution on Monday." Finance minister Schaeuble also said that the leaders have agreed that the financing gap can be closed largely through a debt buyback program".

Looking ahead, eurozone PMIs will be a main focus today, as well as Spain's 10-year bond auction. US will be on Thanksgiving holiday but Canada will release retail sales in US session.