The euro began New York trading at 1.3612, the low to that point, after moving steadily down in the Asian and European markets. The day's high of 1.3681 had taken place just a few minutes after the value date change yesterday at 5:00 pm New York time.
Tokyo traders dropped the euro to 1.3640, executing a few stops at 1.3660 on the way, where it lingered until the continental open. European traders pushed it to 1.3608, permitted a brief profit-taking recovery to 1.3626 and were again selling the currency as New Yorkers came to their desks.
A strong Empire State Manufacturing survey from the N.Y. Fed (12.51vs. 3.50), the highest since May 2012, and marginally higher core PPI gave the euro a thrust down, first to 1.3586 from where it bounced to 1.3601 and then to 1.3582 the low of the day. U.S. yields were also on the rise gaining 3.5 basis point to 2.90%.
It was likely that PPI had the most impact on the euro. Inflation is well under the Fed's 2.0% inflation target and the primary weapon against disinflation and deflation is money creation. Consequently the more inflation or hope of inflation, the greater the chance the Fed will continue its policy tapering.
Retreating U.S yields and euro/yen demand helped bring he euro back to 1.3607 just before the European close from where it dipped back to 1.3589 before the Fed's Beige Book at 2:00 pm. The anecdotal survey of economic conditions in the 12 Fed districts contained no surprises and garnered no reaction from the euro and it closed at 1.3603.
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