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Yen stronger on safe-haven flows
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Focus on US inflation, Fed minutes
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China stock rally fizzles, yuan eases
(Updates as of 2:32 p.m. EDT)
By Alden Bentley and Medha Singh
NEW YORK/LONDON, Oct 8 (Reuters) -
The dollar held firm on Tuesday, treading water just under
last week's seven-week highs as investors assessed the outlook
for further U.S. rate cuts, with concerns about the conflict in
the Middle East and China's struggling economy lending support.
The U.S. data calendar is relatively light this week.
Investors will seek trading signals from Wednesday's release of
minutes from the Federal Reserve's September meeting, where
officials almost unanimously agreed to cut rates by 50 basis
points, as well as Thursday's September Consumer Price Index
report.
"Just given the market was probably caught too short the
dollar on Friday, I think there is going to be caution and
patience ahead of CPI on Thursday," said Vassili Serebriakov, FX
strategist at UBS in New York.
The euro slipped 0.03% to $1.0971, still near the
seven-week low of $1.09515 hit Friday. The pound edged
0.02% higher to $1.3085, after hitting a three-week low of
$1.30595 on Monday.
Traders have shifted their expectations of monetary easing
from the Fed this year. A strong jobs report last week gave
credence to Fed Chair Jerome Powell's comments that the central
bank would stick to its usual quarter-percentage-point rate
reductions after it began its easing cycle with September's big
cut.
New York Fed President John Williams, a permanent vote of
the rate-setting Committee, echoed Powell's comments, telling
the Financial Times in an interview that ran on Tuesday he did
not consider the September move "as the rule of how we act in
the future".
Markets are ascribing an 87% chance of a 25-basis-point
reduction in November, the CME FedWatch tool showed, and some
now bet on no cut at all. Just 50 bps of easing is priced in by
December, down from more than 70 bps a week earlier.
That has helped the buck surge against major rival
currencies like the euro, sterling and the yen. The yen had also
seen some safe-haven buying because of rising geopolitical
worries but gave a bit later so that dollar/yen ended
0.06% firmer at 148.27. It touched a seven-week high of 149.10
on Monday on concerns that the Bank of Japan would be raising
rates in the near term.
Prime Minister Benjamin
Netanyahu said
Israeli airstrikes had killed two successors to Hezbollah's
slain leader, as Israel expanded its offensive against the
Iran-backed group. The comments were released hours after the
deputy leader of Hezbollah left the door open to a negotiated
ceasefire.
The dollar index, which measures the U.S. currency
against major rivals, rose 0.06% to 102.54.
"If soft enough, Thursday's CPI update could eventually help
(in) calming the Fed doves' nerves and prevent the U.S. dollar
from stepping into the medium-term bullish consolidation zone
against many majors," said Ipek Ozkardeskaya, senior analyst at
Swissquote Bank.
"If not, the no-November-cut pricing could take off, and
that would mean higher yields, a stronger U.S. dollar across the
board, weaker other currencies, and some negative pressure on
equity valuations."
The benchmark 10-year U.S. Treasury yield
remained above 4%, having touched the level on Monday for the
first time in two months as traders curtailed wagers on big rate
cuts.
Meanwhile, the Chinese yuan dropped to 7.0648 per
dollar, while China's stock markets returned with a strong open
after a week-long holiday break, but finished well off their
highs as a lack of detail dented optimism around stimulus
measures.
"I guess the markets were expecting more details. So that
probably was much of the focus initially," said Serebriakov.
"Not that there has been big moves on the back of that. I think
the Aussie probably was the highlight today, just
underperforming across the board.
The dollar rose to its highest price since Aug. 19 against
the Canadian dollar and was last up 0.3% at C$1.3657. The
Australian dollar slid 0.27% to US$0.6739, delving its
lowest since Sept. 16.
In cryptocurrencies, bitcoin fell 1.42% to
$62,106.00. Ethereum was flat to $2,441.30.
Currency bid prices at 8 October 06:30 p.m. GMT
Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid
Dollar index 102.54 102.48 0.06% 1.15% 102.64 102.29
Euro/Dollar 1.0971 1.0975 -0.03% -0.6% $1.0997 $1.0961
Dollar/Yen 148.28 148.145 0% 5.03% 148.335 147.35
Euro/Yen 1.0971 162.62 0.04% 4.54% 162.81 161.92
Dollar/Swiss 0.8577 0.8545 0.37% 1.91% 0.8584 0.8531
Sterling/Dollar 1.3086 1.3085 0.03% 2.86% $1.3113 $1.3065
Dollar/Canadian 1.3654 1.362 0.26% 3.01% 1.3676 1.3612
Aussie/Dollar 0.6737 0.6759 -0.3% -1.17% $0.677 $0.6715
Euro/Swiss 0.941 0.9375 0.37% 1.34% 0.9418 0.9366
Euro/Sterling 0.8381 0.8388 -0.08% -3.31% 0.8404 0.8374
NZ Dollar/Dollar 0.6119 0.6126 -0.1% -3.16% $0.6145 0.611
Dollar/Norway 10.7165 10.6388 0.73% 5.74% 10.7409 10.6291
Euro/Norway 11.7585 11.6763 0.7% 4.76% 11.7827 11.675
Dollar/Sweden 10.3522 10.3423 0.1% 2.83% 10.3744 10.3225
Euro/Sweden 11.3581 11.3661 -0.07% 2.09% 11.3745 11.3428
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