Dollar Retreats as Loonie, Mexican Peso Swing on Nafta News

(Bloomberg) -- The dollar retreated from session highs as the Canada dollar and Mexican peso saw sharp swings amid Nafta developments.

The greenback was still higher versus almost all its G-10 peers, as the loonie and peso rebounded after briefly sinking on an earlier Nafta report. The Bloomberg dollar index was on track to finish the session higher by less than 0.1 percent after rising as much as 0.4 percent to its highest since Oct. 6. The euro was mixed amid lingering concerns over Catalonia, with trading flows driven largely by short-term accounts.

• USD/CAD was trading with a slight daily gain at ~1.2522 near the end of the U.S. session as officials said that Nafta talks would extend past the end-2017 deadline. The pair had advanced to the highest since Oct. 6 at 1.2591 following earlier headlines that negotiations hit another snag
• USD/MXN retreated to below 18.7500 in the biggest decline since June 5. It earlier reached a high of 19.1518
• The dollar saw early support from economic data including better-than-expected import and export price data and an as-expected industrial production report; September import prices rose at a 2.7% pace y/y vs est. 2.6% and the NAHB homebuilders index rose to 68 vs forecasts for an unchanged reading of 64
• Trading flows were modest as markets continued to speculate on Fed succession while awaiting developments in Spain; Trump plans to announce his Fed chair nominee before he leaves Nov. 3 for an 11-day trip to Asia and Hawaii, a person familiar with the matter said, and the president said the nominee will be one of the five candidates already named
• EUR/USD was trading around 1.1770, halving its drop from session high of 1.1800. The pair earlier fell to a daily low at 1.1736, extending losses from Monday’s 1.1829 high. Stop-loss sell orders tripped below 1.1770 and 1.1750, according to traders in Europe and Asia familiar with the transactions who asked not to be identified because they aren’t authorized to speak publicly. Bids below 1.1740 cushioned the drop, along with technical support from the Oct. 10 low at 1.1739
  • Markets await a Thursday deadline from PM Rajoy to the Catalan government to clarify its stance on independence. Traders may eye the Oct. 6 low at 1.1670 and the Oct. 12 high at 1.1880 as recent range extremes, while judging euro sentiment to be little changed until those levels are breached. For now, the Catalonia crisis continues to overhang, though it has fueled little fresh selling, traders said
• USD/JPY was trading near session lows at ~112.18. The pair rose to a daily high at 112.48 overnight and relinquished those gains as UST yields retreated from daily highs. Offers to sell USD are positioned above 112.60, while some option-related supply may be linked to 112.50 strikes that roll off in coming days

To contact the reporters on this story: Alexandria Arnold in Seattle at abaca3@bloomberg.net, Dennis Pettit in New York at dpettit5@bloomberg.net.

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Greg Chang