Dollar climbs as case for U.S. rate hikes firms
SYDNEY — The dollar started the week
firmly on Monday, with a strong U.S. labor market reinforcing
bets on higher interest rates as traders braced for data
expected to show stubbornly high inflation.
U.S. unemployment unexpectedly fell last month, Friday
figures showed, and inflation data due on Thursday is forecast
to show headline inflation at a hot 8.1% year-on-year.
Policymakers’ preferred core inflation is seen rising to 6.5%.
Westpac strategist Sean Callow said the data and rising
yields in response was a “robust combination for the dollar.”
“It’s further evidence that the U.S. economy is not
cratering,” he said. “It just feeds into the notion that the Fed
is going to spend the next three weeks saying the same thing
about interest rates.”
Climbing oil prices and geopolitical tension also provided
plenty of reasons for nervousness about growth, weighing on
energy-importer currencies in Europe and even on exporters such
as the growth-sensitive Australian dollar.
The Aussie fell 0.3% to a 2-1/2 year low of $0.6347
in early trade in Asia that was thinned by a holiday in Japan.
Sterling fell 0.2% to $1.1071, while the yen was
drifting into a zone on the weaker side of 145 per dollar that
prompted authorities’ intervention to support it last month.
The yen was last at 145.37 per dollar. The New
Zealand dollar touched a two-week low of $0.5593.
Futures pricing suggests traders see a nearly 90% chance of
a 75 basis point rate hike in the United States next month and
more than 150 bps of tightening by May. Ten-year
Treasury yields rose for a tenth straight week last week.
Benchmark Brent crude futures jumped more than 11%
last week after the Saudi-led production cartel agreed to cut
supply, while intensifying war in Ukraine is also a threat to
Europe’s energy security as winter approaches.
The euro fell below $0.98 on Friday and was last
at $0.9733. The U.S. dollar index was steady at 112.83,
off lows around 110 last week and creeping back toward last
month’s 20-year high of 114.78.
Markets were waiting to see how the Kremlin might respond to
a blast that hit Russia’s only bridge to Crimea. Nuclear-armed
North Korea made a seventh recent missile test over the weekend.
Chinese markets reopen after a week-long holiday, and ahead
of that the offshore yuan was steady at 7.1310 per
dollar. The Communist Party’s 20th National Congress opens on
Sunday and is expected to reaffirm Xi Jinping’s leadership.
Services activity in China shrank for the first time since
May in September, disappointing expectations.
“The yuan will likely trade between 7.0 and 7.2 in the near
term,” said Scotiabank strategist Qi Gao.
Currency bid prices at 2304 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
$0.9733 $0.9732 -0.02% -14.41% +0.9739 +0.9728
145.3800 145.2700 +0.12% +0.00% +145.4150 +145.4400
0.9948 0.9949 +0.01% +9.08% +0.9949 +0.9950
1.1073 1.1093 -0.19% -18.13% +1.1095 +1.1065
1.3742 1.3739 +0.02% +8.69% +1.3754 +1.3725
0.6352 0.6366 -0.22% -12.62% +0.6375 +0.6343
Dollar/Dollar 0.5597 0.5594 +0.06% -18.23% +0.5606 +0.5593
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook. Editing by Sam Holmes.)
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