By Ankur Banerjee
SINGAPORE, Nov 3 (Reuters) – The dollar remained on the back foot on Friday and was on track for a weekly decline against a basket of currencies as traders bet the U.S. Federal Reserve was most likely done raising rates, lifting risk-on sentiment.
Dollar index = USD, which measures the U.S. currency against six rivals, was at 106.22, not far from the weekly low of 105.80 hit on Thursday. The index is on track to drop 0.3% for the week, only its third week of losses since July.
Markets are now pricing in a less than 20% chance of a rate hike in December, compared with 39% a month earlier, CME’s FedWatch tool showed, as a result of the US central bank’s hold on interest rates. stable on Wednesday. However, the Fed left the door open to further increases in borrowing costs in line with the economy’s resilience.
Data on Thursday showed The number of Americans filing new claims for unemployment benefits rose slightly last week as the labor market continued to show no signs of a significant slowdown.
“The data flow supported the notion of a soft landing and the nearing end of the US tourism cycle,” said Tapas Strickland, head of market economics at NAB.
Investors will now focus on October’s non-farm payrolls data later in the day, with a consensus of 180,000 jobs, with a weaker result likely to put further pressure on the dollar.
Analysts said any decline in the dollar was likely to be temporary, pointing to the strength of the US economy relative to the rest of the world.
“The global economy is going to slow down, while the US economy seems to be more resilient … so you could see more Fed versus ECB divergence and then a real rate differential,” said Flavio Carpenzano, chief investment officer for fixed income at Capital. Group. “That’s why it’s hard to see a big catalyst for the dollar weakening in the next few months.”
The European central bank last week snapped a streak of 10 straight rate hikes, with the debate shifting to how long rates will stay high.
member of the ECB board Isabel Schnabel said on Thursday that the central bank is on track to push inflation back to 2% by 2025, but the “last mile” of disinflation may be the hardest, so the bank cannot yet close the door on further rate hikes.
euro EUR = EBS fell 0.03% to $1.0617 after rising 0.49% on Thursday. The single currency is set for a weekly gain of 0.5%.
Japanese yen JPY=EBS was 150.41 per dollar, keeping traders nervous and looking for signs of intervention by Japanese authorities.
The yen has had a tumultuous week, touching a one-year low against the dollar and a 15-year low against the euro on Tuesday after the Bank of Japan adjusted its yield curve control policy.
Kazuo Ueda, the central bank governor, yes continue disassembly Reuters reported on Thursday that its ultra-loose monetary policy and expected to end a decade-long accommodative regime next year.
Uedo’s intentions are based on interviews with six sources familiar with the BOJ’s thinking, including government officials with direct interaction with the bank.
Sterling GBP= traded at $1.2189, down 0.10% on the day, after rising 0.4% and on course for a weekly gain of 0.5%. The Bank of England has joined other major central banks in holding rates steady, stressing that it does not expect to start cutting them anytime soon.
Australian dollar AUD=D3 weakened by 0.19% to $0.642, while the New Zealand dollar NZD=D3 down 0.24% to $0.588.
World exchange rates https://tmsnrt.rs/2RBWI5E
(Reporting by Ankur Banerjee and Rae Wee in Singapore. Editing by Gerry Doyle)
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