SINGAPORE, Nov 7
The dollar saw an uptick in Asia on Friday as both the pound and yen weakened, primarily influenced by disappointing Chinese trade figures that negatively impacted regional markets. The dollar index, which gauges the dollar’s strength against a mix of six currencies, increased by 0.1% to reach 99.796. After losing ground earlier in the month, the dollar regained some momentum as expectations for a rate cut at the next Federal Reserve meeting grew, even though the index has yet to escape its trading range established since August.
According to Christopher Wong, a currency strategist at OCBC in Singapore, “The market is moving blindly because it only has data from the private sector to rely on.” He mentioned that “the correlation has broken down to some extent,” indicating a lack of a clear trend for the dollar. In Asia, he noted, currencies are largely reflecting general market sentiment rather than specific indicators.
The recent U.S. government shutdown led to a delay in the release of monthly nonfarm payroll reports. Traders are now turning their attention to private sector data, which indicates a drop in government and retail jobs as of October. This has been exacerbated by cost-cutting measures and a rise in layoffs attributed to the adoption of artificial intelligence.
Despite the challenges, traders have ramped up their expectations for a rate cut. Yet, Chicago Fed President Austan Goolsby warned on Thursday that the absence of official inflation data during the shutdown has made him more cautious about further cuts. “When it’s foggy, just be a little more careful and slow down,” he advised in a conversation with CNBC.
Current trading in federal funds futures indicates there’s now a 70% likelihood of a rate cut at the upcoming U.S. central bank meeting on December 10, compared to a 62% chance just a day prior, as per CME Group’s FedWatch tool. In currency movements, the dollar rose by 0.2% against the yen, reaching 153.27 yen. This occurred after Japan reported that household spending had increased by 1.8% in September year-over-year, which was slightly below the expected 2.5% rise. The Australian dollar remained steady at $0.64785, while the kiwi dipped by 0.2% to $0.5620. The pound also fell by 0.2%, trading at $1.31195, following the Bank of England’s decision to keep interest rates steady amid a 5-4 vote that saw Governor Andrew Bailey cast the decisive vote. Additionally, Britain’s Chancellor of the Exchequer Rachel Reeves hinted at plans for an increase in personal taxes as a key strategy in the upcoming Budget, as reported by The Times on Thursday. The euro slightly decreased by 0.1%, trading at $1.1535, just off its one-week high.
