Dollar wobbles as comments of Fed's Powell put focus on Sept rate cut
Dollarwobbles as comments of Fed's Powell put focus on Sept rate cut
Shafaq News/The dollar crept off five-week lows on Tuesday, as investors weighed the casefor a September rate cut after comments by Fed Chair Jerome Powell and risingodds for the re-election of former President Donald Trump.
The Japaneseyen was weaker in Asian hours after Monday's one-month high of 157.165 to thedollar, keeping traders wary of further intervention by Tokyo.
On Monday,Powell said the second quarter's three U.S. inflation readings "addsomewhat to confidence" that the pace of price increases is returning tothe Federal Reserve's target in a sustainable way.
Thecomments, likely Powell's last until his press conference after a Fed meetingset for July 30 and 31, shifted rate cut expectations.
Markets nowanticipate 68 basis points (bps) of easing this year, with a rate cut inSeptember fully priced in, the CME FedWatch tool showed.
The dollarindex , which measures the U.S. unit against six peers, was at 104.3, not farfrom the one-month low of 104 it touched on Monday.
"Despitedovish inclinations, Powell remained in a data-dependent mode, which iswarranted after the Fed has burnt its fingers with inflation running backhigher in Q1 after a dovish pivot at the end of 2023," said Charu Chanana,head of currency strategy at Saxo.
"Marketsmay need to wait longer for the confirmation of their September rate cut hopes,and growth and labour data will be on the radar, such as retail salestoday."
U.S. retailsales for June due later in the day are expected to show a decline of 0.3%month-on-month.
The euro wasat $1.0893, just shy of a four-month high touched on Monday, having erased allof the losses of the past few weeks when it came under pressure fromuncertainty about the French election.
The focuswill be on the European Central Bank's policy meeting on Thursday, when it isexpected to hold rates, but attention will be on comments from chief ChristineLagarde to ascertain the timing of the next rate cut.
Markets arepricing in 48 bps of cuts this year.
Japaneseauthorities kept up their warnings against falls in the yen, with Chief CabinetSecretary Yoshimasa Hayashi saying they stood ready to take all possiblemeasures in the currency market.
Traderssuspect Tokyo intervened in the market in another effort to lift the Japanesecurrency last week after the cooler-than-expected U.S. inflation report.
Bank ofJapan data shows authorities may have spent up to 3.57 trillion yen to prop upthe frail yen. Markets will be eyeing fresh money markets data to gauge ifTokyo intervened on Friday as well.
The yen waslast down 0.4% at 158.64 to the dollar and was weaker across other crosses.
"Theyen was due a pullback anyway," said Kyle Rodda, senior financial marketanalyst at Capital.com.
"Afterlast week's soft U.S. data and moves to price in a September Fed cut, plus theintervention by the Ministry of Finance, the yen was pretty hot. It's justcooling off a bit now."
Before lastweek, Tokyo spent roughly 9.8 trillion yen ($61 billion) defending the yen atthe end of April and early May, official data show, but the unit has continuedto slide, hitting its lowest since December 1986 at 161.96 on July 3.
Incryptocurrencies, bitcoin rose 1% to trade just shy of $65,000, near itshighest in a month. Ether was 1% higher at $3,466 for a two-week peak.
Cryptocurrencies,along with shares of companies that could benefit from a Trump presidency,jumped on Monday after an assassination bid on the Republican candidate boostedexpectations that he would win the November election.
Sterling waslittle changed at $1.29625, lurking below its one-year high on Monday, asinvestors await British inflation data on Wednesday for more clues to interestrate policy.
Among othercurrencies, the Australian dollar was 0.27% lower at $0.6741, off a six-monthhigh touched last week. The New Zealand dollar eased 0.17% to $0.6064, hittinga two-week low ahead of inflation data due on Wednesday.
(Reuters)
