Written by Uncle Banerjee
SINGAPORE (Reuters) – The U.S. dollar was at its highest in more than two months against major currencies on Tuesday, spurred by expectations that the Federal Reserve will cut interest rates modestly in the near term, while the yen was weaker than major currencies. The dollar is slowly approaching 150 yen. dollar level.
The euro was stable in early Asian time, but was close to its lowest since Aug. 8 on Monday ahead of Thursday's European Central Bank policy meeting, with the central bank expected to cut rates further. are.
While a range of U.S. economic indicators showed the economy was resilient and the slowdown was modest, inflation rose slightly more than expected in September, prompting traders to bet on a deep Fed rate cut. Reduced bets.
The US central bank began an aggressive policy easing cycle of 50 basis points at its last policy meeting in September. Traders currently see an 89% chance of a 25bp rate cut in November, with a 45bp easing expected by the end of the year.
The dollar index, which measures the value of the U.S. currency against six rival currencies, was at the bottom at 103.18, just shy of Monday's high of 103.36 since Aug. 8. The index rose 2.5%, on track to end three consecutive months of declines.
The dollar strengthened on Monday after Federal Reserve President Christopher Waller called for “further caution” about future interest rate cuts, citing recent economic data.
“Regardless of what happens in the short term, my baseline still calls for a gradual reduction in interest rates over the next year,'' Waller said.
Waller estimated that recent hurricanes and the Boeing strike could make the job market less predictable, potentially reducing monthly job gains by more than 100,000 jobs in October. The next non-farm payrolls (NFP) statistics are expected to be released in early November.
Chris Weston, head of research at Pepperstone, said: “Although most everyone knew that the recent disruption would disrupt NFP prints, Waller's comments quantitate the type of disruption expected. It will help to some extent in the process.”
“Essentially, if the next NFP is this distorted, the market won't have the same level of control in pricing risk until the November FOMC.”
The dollar's rise over the past few weeks has caused the yen to fall, particularly following a dovish shift in rhetoric from Bank of Japan Governor Kazuo Ueda and new Prime Minister Shigeru Ishiba's surprising opposition to further interest rate hikes.
This has raised questions about when Japan's central bank will next tighten policy.
The yen traded at 149.55 yen to the dollar in early trading, and hit a two-and-a-half month high of 149.98 yen on Monday, which was a public holiday in Japan. The last time it reached the 150 level was on August 1st.
Meanwhile, the Australian dollar held firm at $0.67275, while the New Zealand dollar fell 0.13% to $0.6089. The euro was last bought for $1.090825.
China's offshore yuan could help China raise an additional 6 trillion yuan ($850 billion) from government bonds over three years to support its struggling economy through additional fiscal stimulus, Caixin International says. After the report, the exchange rate remained almost unchanged at 7.0935 yuan to the dollar.
Tony Sycamore, a market analyst at IG, said the market now appears to be taking the view that another round of stimulus is on the horizon, likely at China's National People's Congress Standing Committee meeting later this month.
(Reporting by Ankur Banerjee in Singapore; Editing by Jamie Freed)
