Author: Rae Wee
SINGAPORE, Oct 27 (Reuters) – The dollar headed for a weekly gain on Friday, helped by solid US growth data that bolstered the case for higher and longer interest rates, while the yen hovered on the weaker side of $150 ahead of next week’s key policy meeting. .
American economy was growing Thursday’s data showed the fastest pace in nearly two years in the third quarter, as higher wages from a tight labor market helped boost consumer spending.
That added to bets that the Federal Reserve is likely to keep monetary conditions tighter for longer, driving the dollar against a basket of currencies roughly higher.
US dollar index = USD settled at 106.57, having touched a three-week high of 106.89 in the previous session, and was on track for a weekly gain of about 0.4%.
“Obviously, the US economy is much more resilient than expected. It’s both a blessing and a curse for the Fed,” said Christel Rendu de Lint, head of investments at Vontobel.
“But sure, the chances of a soft landing look better than most expected.
Sterling GBP = D3 it jumped 0.07% higher to $1.21355, although it wasn’t too far from Thursday’s three-week low of $1.2070.
euro EUR = EBS it fell 0.02% to $1.0560, heading for a weekly loss of roughly 0.3%.
The European Central Bank (ECB) left interest rates on hold on Thursday unchanged it was expected to end an unprecedented streak of 10 consecutive rate hikes.
“With the macroeconomic environment rapidly deteriorating, as shown by the October PMIs, in our view the ECB will have to proceed very carefully until 2024 and will have no choice but to cut interest rates,” said Julien Lafargue, chief market strategist at Barclays Private. Flask.
Data from earlier this week showed the Eurozone business activity this month took a surprising turn for the worse.
Analysts said the dollar was also supported by some safe-haven flows, with Asia spreading cautious risk-on sentiment from Wall Streetthis saw stocks fall and kept up the supply of US Treasuries. OUR/
“The yield retreat had to do with a bit of a flight to quality because what you saw last night was some pretty devastating action in the stock market,” said Tony Sycamore, market analyst at IG.
Government bond yields move inversely to bond prices.
“The last couple of Fridays … we’ve seen a lot of flight-to-safety moves (because) before the weekend, we’re really not sure what’s going to play out in terms of GauzeSycamore said.
Australian dollar AUD=D3often used as a proxy for risk appetite, gained 0.24% to $0.6337, after falling to a one-year low of $0.6271 on Thursday.
kiwi NZD=D3 it similarly dipped near a roughly 11-month low and was last 0.1% higher at $0.5825.
EYES FOR FIGHT
Only in Asia JPY=EBS remained in the focus of investors as it remained on the weaker side of 150 to the dollar, a level that some see as a potential trigger intervention by the Japanese authorities.
Just JPY=EBS it last stood at 150.38 per dollar, falling near the previous session’s one-year low of 150.78.
Friday’s data showed unexpectedly strong core consumer inflation in Tokyo accelerated in October, keeping the pressure on the Bank of Japan (BOJ) to phase out its ultra-loose monetary policy setting.
BOJ is set to meet next week in the middle increasing speculation that the central bank could change controls on bond yields, with raising the current yield cap set just three months ago being discussed as a possibility.
“If we come in with USD/JPY going up to 151 next Monday, then I think there’s a better chance they’ll lift the cap,” IG’s Sycamore said.
“The higher the dollar/renminbi in the interim, the greater the chance of an improvement.”
World exchange rates https://tmsnrt.rs/2RBWI5E
(Reporting by Rae Wee; Editing by Lincoln Feast.)
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.