FOREX-Dollar gains, euro recovers earlier losses

BY Reuters | ECONOMIC | 08/16/22 10:17 AM EDT
    (Adds quotes, details; updates prices; changes byline,
dateline; previous TOKYO/HONG KONG)
    * Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

    By Karen Brettell
    NEW YORK, Aug 16 (Reuters) - The dollar gained on Tuesday as
it benefited from expectations that the U.S. economy will be
stronger than peers and the Federal Reserve will continue to
hike interest rates.
    The dollar slipped against a volatile euro, however, as the
single currency climbed back into positive territory, after
dropping earlier on data showing that German investor sentiment
fell slightly in August on concerns the rising cost of living
will hit private consumption.
    Europe is struggling with an energy crisis after imposing
sanctions on Russia due to its invasion of Ukraine. Russian
state gas company Gazprom said on Tuesday that
European gas prices could spike by 60% to more than $4,000 per
1,000 cubic meters this winter, as the company's own export and
production continues to fall amid Western sanctions.

    "The market is slowly pricing in a worse outcome this winter
in Europe and that's the major reason the dollar's stayed so
strong," said Adam Button, chief currency analyst at ForexLive
in Toronto. "While the U.S. outlook is deteriorating, it still
looks better than Europe and much of Asia."
    The U.S. dollar index gained 0.09% to 106.55. The
euro rose 0.08% against the dollar to $1.0167, after
earlier falling to $1.0121, the lowest since Aug. 3.
    The greenback gained 0.93% against the yen to
134.57 yen.
    The Japanese currency, which is often affected by the
difference between benchmark yields in the United States and
Japan, rallied last week on expectations that cooler U.S.
inflation would mean a less aggressive pace of Fed tightening
and so lower U.S. yields.
    However in recent days, several Fed policymakers have spoken
of the need for continued rate hikes.
    "Fed officials have no choice but to sound tough in the face
of a very, very tight labor market and far too high inflation,"
Kit Juckes, head of FX strategy at Societe Generale, wrote in a
research note.
    "It's hard to build a compelling case to sell the dollar in
that world."
    The greenback was higher on the day even after U.S. data
showed that U.S. homebuilding fell to the lowest level in nearly
1-1/2 years in July, weighed down by higher mortgage rates and
prices for construction materials.
    Other data showed that industrial production rose more than
expected in July.
    The U.S. currency has also benefited from safe haven flows
as weak Chinese data and a surprise rate cut by China's central
bank on Monday raise concerns about global growth.
    The dollar has "supplanted the yen as the preferred safe
haven in the fx market," said Button.
    Commodities-sensitive currencies including the Australian
dollar have also been hurt by worries about China's demand for
iron ore and other assets.
    The Aussie was down 0.11% on the day after minutes from the
Reserve Bank of Australia's (RBA) August policy meeting showed
that the RBA Board expected further rate hikes given inflation
was far above target and the labor market at its tightest in
decades.
    The annual pace of Australian inflation rose even faster
than first reported over the June quarter according to a new
monthly measure of consumer prices.
    The New Zealand dollar fell 0.41%, hurt by concerns about
global growth. New Zealand's central bank is expected to deliver
its fourth straight half-point rate hike on Wednesday but that
appeared to have been priced into the currency already.

    The greenback fell 0.20% against the Canadian dollar after
Canadian inflation data showed still high underlying inflation
pressure and raised bets for a hefty rate hike by the Bank of
Canada next month.

    ========================================================
    Currency bid prices at 9:49AM (1349 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
                                              Session
 Dollar index                 106.5500       106.4700    +0.09%         11.381%       +106.9400   +106.4300
 Euro/Dollar                  $1.0167        $1.0159     +0.08%         -10.57%       +$1.0169    +$1.0123
 Dollar/Yen                   134.5650       133.3200    +0.93%         +16.89%       +134.6750   +132.9500
 Euro/Yen                     136.82         135.44      +1.02%         +4.99%        +136.8700   +134.9500
 Dollar/Swiss                 0.9495         0.9465      +0.33%         +4.11%        +0.9513     +0.9455
 Sterling/Dollar              $1.2077        $1.2053     +0.22%         -10.68%       +$1.2078    +$1.2008
 Dollar/Canadian              1.2875         1.2903      -0.20%         +1.85%        +1.2928     +1.2871
 Aussie/Dollar                $0.7015        $0.7022     -0.11%         -3.51%        +$0.7040    +$0.6992
 Euro/Swiss                   0.9652         0.9614      +0.40%         -6.91%        +0.9657     +0.9605
 Euro/Sterling                0.8416         0.8425      -0.11%         +0.19%        +0.8440     +0.8413
 NZ                           $0.6336        $0.6362     -0.41%         -7.44%        +$0.6370    +$0.6318
 Dollar/Dollar
 Dollar/Norway                9.6815         9.6920      -0.07%         +9.94%        +9.7465     +9.6845
 Euro/Norway                  9.8435         9.8657      -0.23%         -1.69%        +9.8818     +9.8378
 Dollar/Sweden                10.3633        10.3310     +0.41%         +14.92%       +10.4058    +10.3337
 Euro/Sweden                  10.5371        10.4938     +0.41%         +2.96%        +10.5421    +10.5064



 (Reporting by Karen Brettell; Additional reporting by Alun John
in Hong Kong; Editing by Susan Fenton)

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