Written by Brigid Riley
TOKYO (Reuters) – The dollar was flat on Wednesday, offering some relief to the yen and other major currencies after surging to seven-week highs last week as investors took a break to assess the outlook for U.S. interest rates. It gave me a feeling.
The New Zealand dollar fell to $0.60705, its lowest since August 19, after the Reserve Bank of New Zealand (RBNZ) cut interest rates by 50 basis points, opening the door to more aggressive monetary easing.
U.S. economic data has been sparse this week, after last Friday's strong jobs report helped the dollar strengthen and the market dampened expectations for future interest rate cuts.
Investors are expected to receive minutes from the Federal Reserve's September meeting later Wednesday, which show discussion of a labor market that appeared to be deteriorating at the time. The meeting ended with all but one policymaker agreeing to cut interest rates by 50 basis points.
However, strong non-farm employment data has caused the market to reassess expectations for near-term Fed rate cuts. Investors are currently pricing in about an 85% chance of a quarterly basis point (bp) cut, according to the CME FedWatch tool, which showed there was a slim chance the Fed would leave interest rates unchanged.
The US consumer price index for September, to be released on Thursday, will be the main data this week.
“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 , which measures the U.S. dollar against a basket of currencies, rose 0.11% to 102.6, not far from Friday's seven-week high of 102.69.
The euro was down 0.07% at $1.0973, while the pound was almost unchanged at $1.3099, close to Monday's three-week low of $1.30595.
The dollar/yen rose 0.19% to 148.475 yen, after hitting a seven-week high of 149.10 yen on Monday.
“Markets will be reluctant to accumulate yen shorts in the face of uncertainty about elections in both Japan and the US,” said Wei Liang Zhang, currency strategist at DBS.
The yen has been in whiplash since Japan's new Prime Minister Shigeru Ishiba, known as a critic of easy monetary policy, stunned markets with his recent remarks that Japan was not ready for further interest rate hikes.
Ishiba has set a snap election for October 27, ahead of the Bank of Japan's monetary policy meeting in October and the US presidential election next month.
Chan said Japanese authorities issued a verbal warning about sharp exchange rate fluctuations earlier this week, which would “further restrain” dollar/yen from rising above the 150 yen level.
Elsewhere, it was last down 0.5% to $0.61055 as investors appreciated the RBNZ's policy decisions and clear dovish signals that suggest more rate cuts are likely in the coming months. It became. A majority of economists in a Reuters poll expected a 50 basis point cut in interest rates on Wednesday.
The Australian dollar fell towards a three-week low of $0.6715 on Tuesday before rising on news that China's Ministry of Finance is scheduled to hold a press conference on fiscal policy on Saturday. It last traded 0.31% lower at $0.6726.
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 looked to policymakers for more stimulus to get the economy back on track. This disappointed the investors who had done so.
The dollar fell 0.28% to 7.0550.
