Dollar edges lower as investors wait on Fed’s Powell
NEW YORK — The dollar index slipped while
the euro was steady on Thursday in choppy trading as investors
awaited Federal Reserve Chairman Jerome Powell’s speech on
Friday for further clues about the pace of the U.S. central
bank’s rate hikes.
Investors are tossing up between the likelihood of a 50 or
75 basis point rate increase in September as the Fed battles
inflation while facing some softer U.S. economic data.
“It seems to me that markets are maybe expecting a hawkish
message from Powell,” said Shaun Osborne, chief FX strategist at
Scotiabank in Toronto.
However, “since the last FOMC the numbers out of the U.S.
have not really been all that good. I think with gasoline prices
in the U.S. coming down quite significantly there is the view
that inflationary pressures may well have peaked,” Osborne said.
Fed officials on Thursday were noncommittal about the size
of the rate hike they will approve at their Sept. 20-21 meeting,
but continued hammering the point they will drive rates up and
keep them there until inflation has been tamed.
“The only dovish element that is immediately up for debate
is incremental policy changes to fed funds at upcoming
meetings,” Alan Ruskin, macro strategist at Deutsche Bank, said
in a note on Thursday.
However, “even here, do not expect Powell to resolve the 50
bp versus 75 bp debate for the September meeting,” Ruskin said,
noting that the Fed will want to see August’s jobs and inflation
data before making a decision.
Fed funds futures traders are pricing in a 65% chance of a
Fed rate hike of another 75 basis points at its September
meeting, and a 35% probability of a 50 basis points increase.
The dollar index fell 0.14% to 108.46. It is holding
just below a 20-year high of 109.29 reached in on July 14.
The currency edged higher after data on Thursday showed the
U.S. economy contracted at a more moderate pace than initially
thought in the second quarter.
The euro was unchanged against the greenback on
the day at $0.9968.
The single currency briefly rose back above parity
overnight, before retracing after the release of a closely
watched index showing business morale in Germany in August had
fallen to its lowest since June 2020.
European Central Bank policymakers meeting last month
appeared increasingly concerned that high inflation was getting
entrenched, even as the risk of a recession loomed in the bloc,
the accounts of the July 21 meeting showed on Thursday.
The euro/dollar’s direction this week has largely been
driven by soaring natural gas prices, which are correlated with
a weaker euro because of the region’s dependence on gas for its
energy needs. That, plus worries about the global economy had
sent investors into dollars earlier this week.
The Australian dollar was lifted after a Chinese state media
report said China would take more steps to support the economy,
including increasing funding support for infrastructure projects
and ramping up support for private firms and technology
The Aussie gained 1.01% to $0.6976.
China’s yuan also rebounded from a two-year low against the
dollar as official guidance was set at a firmer-than-expected
Market participants said the guidance could be a sign that
authorities are becoming increasingly uncomfortable with rapid
losses in the yuan, which has fallen about 1.6% against the
dollar so far in August.
“How the yuan performs can at the margin affect how the
dollar trades more broadly against the majors, so that’s
something to certainly keep an eye on in the short run at
least,” said Osborne.
The dollar dipped 0.15% against the Chinese currency
The greenback also fell 0.47% against the Japanese yen
The Bank of Japan must maintain massive monetary stimulus
and its dovish policy guidance until wages show clearer signs of
increasing, one of its board members said, reinforcing the
central bank’s outlier status in a global wave of monetary
Currency bid prices at 3:02PM (1902 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Dollar index 108.4600 108.6300 -0.14% 13.377% +108.7000 +107.9700
Euro/Dollar $0.9968 $0.9970 +0.00% +0.00% +$1.0033 +$0.9949
Dollar/Yen 136.4650 137.1200 -0.47% +0.00% +137.1950 +136.3150
Euro/Yen 136.03 136.65 -0.45% +0.00% +136.9800 +136.0200
Dollar/Swiss 0.9636 0.9668 -0.33% +0.00% +0.9670 +0.9615
Sterling/Dollar $1.1826 $1.1791 +0.31% +0.00% +$1.1864 +$1.1790
Dollar/Canadian 1.2938 1.2972 -0.27% +0.00% +1.2975 +1.2897
Aussie/Dollar $0.6976 $0.6907 +1.01% +0.00% +$0.6991 +$0.6903
Euro/Swiss 0.9606 0.9631 -0.26% +0.00% +0.9656 +0.9603
Euro/Sterling 0.8426 0.8443 -0.20% +0.00% +0.8461 +0.8424
NZ $0.6220 $0.6191 +0.49% +0.00% +$0.6251 +$0.6177
Dollar/Norway 9.6685 9.6900 -0.01% +0.00% +9.7235 +9.6095
Euro/Norway 9.6401 9.6565 -0.17% +0.00% +9.6959 +9.6075
Dollar/Sweden 10.5966 10.6066 -0.12% +0.00% +10.6190 +10.5244
Euro/Sweden 10.5631 10.5754 -0.12% +0.00% +10.5867 +10.5396
(Additional reporting by Tommy Wilkes in London; Editing by
Kirsten Donovan and Richard Chang)
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