Written by Brigid Riley
TOKYO (Reuters) – The dollar was flat on Wednesday as investors paused to assess the outlook for the path of U.S. interest rates, adding some support to the yen and other major currencies, which soared to a seven-week high last week. It gave me a sense of relief.
The New Zealand dollar fell to $0.6096, the lowest since August 19, after the Reserve Bank of New Zealand (RBNZ) cut interest rates by 50 basis points (bp).
The Kiwi was last trading down 0.55% at $0.61035.
A majority of economists in a Reuters poll last week expected a sharp rate cut of 0.5 percentage points. In August, the central bank began an easing cycle aimed at lowering interest rates from a 15-year high.
This week's U.S. economic data has been relatively light, with the dollar surging on Friday's positive jobs report and providing a respite after markets reassessed the expected size of future interest rate cuts.
Investors are expected to obtain minutes from the Fed's September meeting on Wednesday, which record discussions about the labor market, which appeared to be deteriorating at the time, and which included one policymaker. All but one agreed to a 50 basis point rate cut.
However, bets on further deep cuts in November were taken off the table as the latest non-farm employment data showed a more resilient picture.
Markets are currently pricing in about an 85% chance of a quarterly basis point (bp) cut, according to the CME FedWatch tool, indicating there is a slim chance the Fed will leave interest rates unchanged.
The main data this week will be the September consumer price index, which will be released on Thursday.
“This week's US inflation data and upcoming corporate earnings will be key to sustaining the US dollar's rebound and should reinforce the US exceptionalism narrative,” Westpac IQ analysts said in a note. .
The dollar index, which measures the greenback against a basket of currencies, was flat at 102.490, not far from Friday's seven-week high of 102.69.
The dollar's lull kept the euro hovering around $1.0977, while the pound was at $1.3101, close to Monday's more than three-week low of $1.30595.
The dollar/yen pair traded in a narrow range after hitting a seven-week high of 149.10 yen on Monday, ending at around 148.28 yen.
Elsewhere, the Australian dollar fell to $0.6715 on Tuesday, its lowest since September 16, after minutes of the country's central bank's latest meeting were described as dovish. He was licking his wounds. The stock last traded at $0.67415, not far from that low, down 0.08%.
Investors remain focused on China after a volatile day for China and Hong Kong markets in pre-market trading.
China's government said on Tuesday it was “fully confident” of achieving its full-year growth target, but refrained from introducing stronger fiscal measures and expected more support from policymakers to get the economy back on track. Investors who had been in the market were disappointed.
The offshore yuan stabilized at around 7.0695 yuan to the dollar.
(Reporting by Brigid Riley; Editing by Edwina Gibbs)
