Dollar down in choppy trading after data; Swiss franc gains following rate cut

NEW YORK – The dollar was down in choppy trading on Thursday after a host of US data indicated a relatively healthy economy, while the Swiss franc rose after the country’s central bank cut interest rates by 25 basis points (bps).

The greenback began paring losses after data showed US weekly jobless claims fell by 4,000 to a four-month low of 218,000, below the 225,000 forecast by economists polled by Reuters.

In addition, other reports showed corporate profits increased at a more robust pace than initially thought in the second quarter while gross domestic product grew at an unrevised 3%.

A gauge of new orders for key US-manufactured capital goods unexpectedly rose in August, although business spending on equipment appears to have waned in the third quarter.

“Looks like pretty good news for the dollar,” said Joseph Trevisani, senior analyst at FXStreet in New York.

“Once again we have this split between the Fed cutting rates and an economy that is essentially growing at 3% or more, so the market doesn’t quite know what to make of this.”

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.33% to 100.61 after rising as high as 100.95 in the session. The euro was up 0.34% at USD 1.117.

The Federal Reserve has recently signaled a shift in focus away from inflation and towards keeping the labor market healthy, but delivered a larger-than-usual 50-bp interest rate cut last week.

The market is completely pricing in a cut of at least 25 basis points at the Fed’s Nov. 6-7 meeting, with a 52.1% chance for another outsized half-percentage-point cut, according to CME Group’s FedWatch Tool.

SWISS RATE CUT

Against the Swiss franc, the dollar weakened 0.27% to 0.848 after the Swiss National Bank reduced interest rates by 25 basis points, echoing the moves by the Fed and European Central Bank (ECB), and left the door open for more rate cuts as inflation cools sharply.

Analysts at Goldman Sachs said the SNB cut was “motivated by lower inflationary pressure, driven, among other things, by a stronger franc” and expect a further 25-bp cut at the central bank’s December meeting given its dovish guidance and new inflation projections.

A slew of US central bank officials were speaking on Thursday, although several, including Fed Chair Jerome Powell declined to comment on monetary policy.

US Treasury Secretary Janet Yellen said labor market and inflation data suggest the US economy is on a path to a “soft landing,” but the “last mile” in the effort to tame inflation revolves around bringing down housing costs.

The Japanese yen strengthened 0.01% against the greenback to 144.72 per dollar. Bank of Japan policymakers were divided on how quickly the central bank should raise interest rates further, minutes of the bank’s July meeting showed, highlighting uncertainty on the timing of the next increase in borrowing costs.

Sterling strengthened 0.5% to USD 1.3391.

(Reporting by Chuck Mikolajczak; Editing by Paul Simao)