FOREX-US dollar falls as Fed's rate-hike cycle seen as likely done

BY Reuters | ECONOMIC | 12/01/23 12:26 PM EST
    (Refiles to add Fed Chair Jerome Powell's name in lead paragraph)

      Fed's Powell says risks are more balanced

      U.S. manufacturing sector remains in contraction territory

      Post-Powell, U.S. rate futures price in 62% chance of March rate cut

    By Gertrude Chavez-Dreyfuss
       NEW YORK, Dec 1 (Reuters) - The dollar fell on Friday, after two days of gains, as Federal Reserve
Chair Jerome Powell struck a cautious tone on further interest rate moves, suggesting the U.S. central bank
is likely done with its tightening cycle.
        He said it was clear that U.S. monetary policy was slowing the economy as expected, with a benchmark
overnight interest rate "well into
    restrictive territory
    ." Powell noted, however, that the Fed is prepared to tighten policy further if deemed appropriate.

        "Markets view today's comments as inching toward the dovish camp," said Jeffery J. Roach, chief
economist at LPL Financial, by email. A few weeks ago, Powell said policy is restrictive but today, he
believes policy is 'well into restrictive territory.' I think it's fair for markets to latch on to that

        The U.S. dollar index - which tracks the currency against six major counterparts - was last down
0.2% at 103.24 after ending November on Thursday with its weakest monthly performance in a year.
        Following Powell's remarks, U.S. rate futures on Friday priced in a 62% chance of a rate cut by the
March meeting next year, compared to 43% late on Thursday, according to the CME's FedWatch tool. For the May
meeting, U.S. rate cut chances surged to nearly 90%, from about 76% the day before.

        Powell's remarks came after data showed the U.S. manufacturing sector remained weak in November,
affirming his statement that the Fed rate hikes have started to slow the economy.

    The Institute for Supply Management (ISM) said its manufacturing PMI was unchanged at 46.7 last month.
It was the 13th consecutive month that the PMI stayed below 50, which indicates contraction in
    Softer U.S. and euro zone inflation data on Thursday reinforced expectations that central banks in both
regions might be done raising interest rates in their battle against price rises, leading traders to bet on
earlier cuts next year.
    Goldman Sachs on Friday said it now expected the European Central Bank to deliver its first rate cut in
the second quarter of 2024, compared to a previous forecast of a cut in the third quarter.
    Currency movements were a little more subdued on Friday, after month-end trades on Thursday contributed
to bigger swings, analysts said.
    Mixed economic data across Europe failed to set the tone for the euro, with a survey showing a downturn
in euro zone manufacturing activity eased slightly last month but remained deeply in the red. Britain also
reported contraction in manufacturing, but an improved reading for a third straight month.
    The euro was last down 0.1% at $1.0882, cutting losses and benefiting from a sell-off in the
dollar following Powell's comments.
    Sterling rose 0.5% to $1.266.
    Against the yen, the dollar dropped 0.9% to 146.90 yen. The yen was on course for its third
straight week of gains, pulling it away from the near 33-year low of 151.92 per dollar touched in the middle
of November.
    Rising expectations of the Bank of Japan abandoning its ultra-easy monetary policy next year along with
a drop in U.S. yields have buoyed the Asian currency in the past few weeks.
    In cryptocurrencies, bitcoin continued to strengthen, rising to a fresh 18-month high of
$38,839. It was last up 2.8% at $38,765.

    Currency bid prices at 11:58AM (1658 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 103.2300       103.4500    -0.20%         -0.251%       +103.7300   +103.2000
 Euro/Dollar                  $1.0880        $1.0889     -0.06%         +1.55%        +$1.0912    +$1.0829
 Dollar/Yen                   146.9700       148.2100    -0.84%         +12.10%       +148.3400   +146.8600
 Euro/Yen                     159.90         161.35      -0.90%         +13.98%       +161.7700   +159.8100
 Dollar/Swiss                 0.8704         0.8753      -0.56%         -5.87%        +0.8768     +0.8699
 Sterling/Dollar              $1.2682        $1.2627     +0.46%         +4.88%        +$1.2690    +$1.2615
 Dollar/Canadian              1.3495         1.3559      -0.47%         -0.39%        +1.3564     +1.3495
 Aussie/Dollar                $0.6661        $0.6605     +0.85%         -2.29%        +$0.6664    +$0.6600
 Euro/Swiss                   0.9469         0.9526      -0.60%         -4.29%        +0.9545     +0.9450
 Euro/Sterling                0.8576         0.8624      -0.56%         -3.03%        +0.8634     +0.8574
 NZ                           $0.6196        $0.6155     +0.70%         -2.39%        +$0.6200    +$0.6152
 Dollar/Norway                10.6540        10.8270     -1.25%         +8.95%        +10.8050    +10.6920
 Euro/Norway                  11.5954        11.7648     -1.44%         +10.50%       +11.7760    +11.5933
 Dollar/Sweden                10.3692        10.4994     -1.17%         -0.37%        +10.5200    +10.3660
 Euro/Sweden                  11.2833        11.4168     -1.17%         +1.20%        +11.4359    +11.2810


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