By Ankur Banerjee
SINGAPORE (Reuters) – The U.S. dollar rose to more than two-month highs against major currencies on Tuesday, boosted by bets that the Federal Reserve will proceed with modest rate cuts in the near term, pushing the yen closer to 150 units per dollar. level.
The euro also remained on the defensive, trading near the lowest level since August 8 hit on Monday ahead of Thursday’s European Central Bank policy meeting, where the central bank appears set to pursue another interest rate cut. .
A raft of US data has shown the economy is resilient and slowing only modestly, while inflation in September rose slightly more than expected, prompting traders to trim bets on big rate cuts by the US. the Federal Reserve.
The U.S. central bank kicked off its easing cycle with an aggressive 50 basis points at its last policy meeting in September, but market expectations have shifted toward a slower pace of cuts, boosting the dollar.
Traders now chalk up an 89% chance of a 25 basis point cut in November, with 45 basis points of overall easing priced in for the year.
The , which measures the U.S. currency against six rivals, was at 103.27, just below the 103.36 level since the Aug. 8 hit on Monday. The index is up 2.5% and is on track to break its three-month losing streak.
The dollar received a boost after Federal Reserve Governor Christopher Waller on Monday called for “more caution” about future interest rate cuts, citing recent economic data.
“Whatever happens in the near term, my starting point still calls for a gradual reduction in the policy rate over the next year,” Waller said.
Recent hurricanes and a strike at Boeing (NYSE:) could hamper labor market readings, perhaps eliminating more than 100,000 jobs from monthly employment gains in October, Waller estimated. The next nonfarm payrolls (NFP) data will be released in early November.
“Most knew that the recent disruptions would make NFP printing a tricky business, but Waller’s comment goes some way to quantifying the type of disruptions we can expect,” said Chris Weston, head of research at brokerage Pepperstone. .
“Essentially, with the upcoming NFP so distorted, the market will not have the same level of control in risk pricing at the November FOMC meeting.” The next meeting of the Federal Reserve will be on November 6 and 7.
The rising dollar has pushed the yen lower, especially after a shift in dovish rhetoric from Bank of Japan Governor Kazuo Ueda and surprising opposition to further rate hikes from new Prime Minister Shigeru Ishiba.
This has raised questions about when Japan’s central bank will tighten policy next, with a very slim majority of economists in a Reuters poll expecting the BOJ to forgo raising rates again this year.
The yen last hit 149.72 per dollar, having fallen as low as 149.98 on Monday, its weakest level since Aug. 1. The yen is down 4% this month and was trading below 140 to the dollar just a month earlier.
Meanwhile, the Australian dollar fell 0.19% to $0.67135, while the New Zealand dollar fell 0.22% to $0.60835. The euro was down 0.15% at $1.0892.
both at home and abroad, weakened on Tuesday to hit a one-month low against the dollar. [CNY/]
Sterling last bought $1.30525 ahead of UK wages data that could offer clues about the Bank of England’s (BoE) next move at its monetary policy meeting next month.
Expectations that persistent inflation would keep the Bank of England on a path of gradual rate cuts relative to its peers (the Federal Reserve and the ECB) had underpinned the pound’s excellent performance this year, but shifting bets have pushed lower in recent weeks, with the pound falling more than 2%. for the month.