Euro fragile as Fed hike looms, Aussie hike bets retreat


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SINGAPORE — The euro nursed losses on

Wednesday after its sharpest drop in two weeks as a cut in

Russian gas supply sent energy prices soaring, while the

Australian dollar dipped with relief that inflation was not as

hot as some investors had bet.

But most moves were modest as traders awaited a Federal

Reserve policy announcement at 1800 GMT.

The euro rose 0.3% to $1.0145 in Asia, not enough

to recoup much of Tuesday’s 1% slide as Europe’s growth remains

dependent on what are diminishing Russian gas flows.

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The yen was steady at 137.00 per dollar. Sterling

crept 0.2% higher to $1.2053. The kiwi was flat at

$0.6230 and Australian dollar fell 0.2% to $0.6923.

Australia’s year-on-year core inflation hit 4.9% in June,

miles above the central bank’s target for 2-3% but not as bad as

some investors had feared and rate hike bets were pulled back.

“The market has taken out the small chance of a 75 basis

point increase … I think that is the reason the Aussie has

sold off a little, out of that relief,” said Ray Attrill, head

of FX strategy at National Australia Bank, adding that investors

were positioned for an upside surprise.

Markets are now pricing a 85.7% chance of a 50 bps rate hike

by the Reserve Bank of Australia next week, with 14.3% expecting

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a more muted 25 bps increase.

For the Fed, a 75 bps is priced in, with a 13% chance of a

supersized 100 bps raise.

The focus will also be on the Fed’s news conference at 1830

GMT for any hint on whether policymakers’ resolve to hike

further is waning as growth slows.

“It’s more of a wait-and-see rather than the expectation of

a large surprise,” said Galvin Chia, emerging markets strategist

at NatWest Markets.

He expects the U.S. dollar to remain supported by safe haven

flows over the longer term, amid a darkening global outlook.

Overnight data showed U.S. consumer confidence falling to a

nearly 1-1/2 year low and new home sales slumping, while Walmart

shares slid after the retailer issued a profit warning.

Last week European manufacturing data was soft.

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“Downside risks to the eurozone growth and broader growth

concerns globally tends to suggest more dollar strength,” Chia

said.

The U.S. dollar index stood at 107.08, not far below

mid-July’s 20-year high of 109.290. It gained 0.64% overnight,

snapping three straight sessions of declines.

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

Currency bid prices at 0318 GMT

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

Previous Change

Session

Euro/Dollar $1.0146 $1.0117 +0.28% +0.00% +1.0147 +1.0119

Dollar/Yen 136.9450 136.9500 +0.01% +0.00% +137.1350 +136.8100

Euro/Yen

Dollar/Swiss 0.9619 0.9632 -0.08% +0.00% +0.9628 +0.9618

Sterling/Dollar 1.2052 1.2030 +0.20% +0.00% +1.2057 +1.2030

Dollar/Canadian 1.2866 1.2886 -0.14% +0.00% +1.2888 +1.2863

Aussie/Dollar 0.6925 0.6937 -0.20% +0.00% +0.6958 +0.6913

NZ 0.6231 0.6228 +0.04% +0.00% +0.6247 +0.6227

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Rae Wee; Editing by Sam Holmes and Kim Coghill)

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