Dollar firm as Fed digs in for inflation fight


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SINGAPORE — The dollar was on the front

foot on Thursday after minutes from the Federal Reserve’s July

meeting pointed to U.S. interest rates staying higher for longer

to bring down inflation.

The greenback gained most against the Antipodeans,

especially the Aussie, which was dragged down as

weaker-than-expected wage growth weighed on Australia’s interest

rate outlook.

The Australian dollar fell 1.2% overnight and on

Thursday hovered at $0.6930, just above Wednesday’s one-week low

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of $0.6912 and the 50-day moving average at $0.6923.

Australian labor market data is due at 0130 GMT.

The New Zealand dollar also fell, losing nearly 1%

to unwind an initial jump after the central bank hiked interest

rates and steepened its projected rate-hike track. The greenback

rose against the yen and sterling and was steady on the euro.

“The bigger picture for the dollar is that it’s in a strong

uptrend,” said Matt Simpson, a senior analyst at brokerage City

Index in Brisbane, adding it has now paused a weeks-long

pullback

“In some ways, bulls are looking to step back in and I think

the Fed minutes gave them a reason to do so.”

The dollar rose 0.6% on the yen overnight and held

at 134.90 yen on Thursday. The euro bought $1.0184.

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The U.S. dollar index was steady at 106.570.

Federal Reserve officials saw “little evidence” late last

month that U.S. inflation pressures were easing, the minutes

showed. The minutes flagged an eventual slowdown in the pace of

hikes, but not a switch to cuts in 2023 that traders until

recently had priced in to interest-rate futures.

“Once a sufficiently restrictive level has been reached,

they are going to stick to that level for some time,” Rabobank

strategist Philip Marey said in a note to clients.

“This clearly stands in contrast to the early Fed pivot that

the markets have been pricing in.”

Traders see about a 36% chance of a third consecutive 75

basis point Federal Reserve rate hike in September, and expect

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rates to hit a peak around 3.7% by March, and to hover around

there until later in 2023.

Sterling also slid overnight after double-digit

inflation focused investors’ concerns on recession risk.

Britain’s consumer price inflation rose to 10.1% in July,

its highest since February 1982, official figures showed and

after a brief blip higher sterling fell 0.4% to $1.2050.

It also dropped below its 200-day moving average against the

euro.

“Do we get weaker sterling now, ahead of the inevitable

recession? Or will sterling hold around here until rates peak

and the economic disaster can dominate,” asked Societe Generale

strategist Kit Juckes in a note.

“I am confident that we will make a new cycle low this

year,” he said.

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========================================================

Currency bid prices at 0032 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.0184 $1.0178 +0.06% +0.00% +1.0185 +1.0173

Dollar/Yen 134.8200 134.9950 -0.06% +0.00% +135.1650 +134.9150

Euro/Yen

Dollar/Swiss 0.9505 0.9519 -0.12% +0.00% +0.9517 +0.9508

Sterling/Dollar 1.2052 1.2050 +0.00% +0.00% +1.2054 +1.2043

Dollar/Canadian 1.2920 1.2915 +0.00% +0.00% +1.2920 +1.2914

Aussie/Dollar 0.6937 0.6937 -0.02% +0.00% +0.6939 +0.6929

NZ 0.6283 0.6281 +0.02% +0.00% +0.6284 +0.6275

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; editing by Richard Pullin)

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