FOREX-US dollar falls on dovish remarks by Fed's Powell

BY Reuters | ECONOMIC | 12/01/23 03:54 PM EST

      Powell says risks of over- or under-tightening now balanced

      U.S. manufacturing sector remains in contraction territory

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

 (Adds comment, updates prices)
    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, saying that the risk of under- or
over-tightening is now more balanced.
    The market viewed his comments as dovish, with investors pricing in expectations that the Fed is likely
done raising rates.
    Powell 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.
    "Powell just gave the thumbs up to the other side of the camp believing that the Fed has acted correctly
and can afford to wait-and-see without (hiking), but not necessarily cutting," said Juan Perez, director of
trading at Monex USA in Washington.
    The U.S. dollar index - which tracks the currency against six major counterparts - was last down 0.2% at
103.23 after ending November on Thursday with its weakest monthly performance in a year. It is poised
to end lower for a third straight week.
    Following Powell's remarks, U.S. rate futures on Friday priced in a 64% chance of a rate cut by the
March meeting, compared to 43% late on Thursday, according to the CME's FedWatch tool. For the May meeting,
U.S. rate cut chances surged to 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 comments that 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, leading traders to bet on earlier cuts next year.
    Goldman Sachs on Friday said it 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.
    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 $1.0874, cutting losses and benefiting from a sell-off in the
dollar following Powell's comments.
    Sterling rose 0.5% to $1.2699.
    Against the yen, the dollar dropped 0.9% to 146.855 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 an 18-month high of $38,839.
It was last up 2.8% at $38,788.

    Currency bid prices at 3:10PM (2010 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 103.2400       103.4500    -0.18%         -0.242%       +103.7300   +103.1100
 Euro/Dollar                  $1.0873        $1.0889     -0.13%         +1.49%        +$1.0912    +$1.0829
 Dollar/Yen                   146.8550       148.2100    -0.89%         +12.04%       +148.3400   +146.6600
 Euro/Yen                     159.69         161.35      -1.03%         +13.82%       +161.7700   +159.6500
 Dollar/Swiss                 0.8694         0.8753      -0.67%         -5.98%        +0.8768     +0.8680
 Sterling/Dollar              $1.2700        $1.2627     +0.58%         +5.01%        +$1.2715    +$1.2615
 Dollar/Canadian              1.3498         1.3559      -0.46%         -0.39%        +1.3564     +1.3488
 Aussie/Dollar                $0.6671        $0.6605     +1.00%         -2.14%        +$0.6675    +$0.6600
 Euro/Swiss                   0.9451         0.9526      -0.79%         -4.49%        +0.9545     +0.9450
 Euro/Sterling                0.8560         0.8624      -0.74%         -3.21%        +0.8634     +0.8561
 NZ                           $0.6200        $0.6155     +0.73%         -2.35%        +$0.6205    +$0.6152
 Dollar/Norway                10.6660        10.8270     -1.40%         +8.77%        +10.8050    +10.6580
 Euro/Norway                  11.6025        11.7648     -1.38%         +10.57%       +11.7760    +11.5933
 Dollar/Sweden                10.3758        10.4994     -1.16%         -0.31%        +10.5200    +10.3579
 Euro/Sweden                  11.2841        11.4168     -1.16%         +1.21%        +11.4359    +11.2810


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