FOREX-Dollar is licking its wounds ahead of Fed Chairman Powell’s remarks

Author: Rae Wee

SINGAPORE, Nov 8 (Reuters)The dollar returned to its strong footing on Wednesday, moving higher after a series of Federal Reserve speakers left the door open to more rate hikes as traders looked ahead to Chairman Jerome Powell’s speech on the central bank’s future policy.

The dollar, which fell last week as a result of the Fed’s decision to leave its key interest rate unchanged stable and on the data directed to cooling The US labor market bottomed out as markets remain conflicted whether US rates have peaked and how soon the Fed might start easing monetary conditions.

Futures point to a roughly 15% chance of another hike by January, but CME’s FedWatch tool prices a 22% chance a rate cut could come as early as March.

British pound GBP = D3which hit a seven-week high against the greenback earlier in the week, was last a little further off at $1.2286.

Japanese yen JPY=EBS slipped again to the weaker side of 150 per dollar after a slight dip last week. It last stood at 150.56 per dollar.

US dollar index = USDwhich last week posted its steepest weekly decline in about four months, rose 0.03% to 105.57 and was on track for a weekly gain.

“We’ve seen a slight recovery in the US dollar, but that’s to be expected after such a sharp selloff,” said Matt Simpson, chief market analyst at City Index.

“We’re also seeing the obligatory hawkish response this week from Fed spokesmen trying to deflect market expectations of a rate cut.”

He killed Fed policy makers they maintained a equable tone on Tuesday, saying they were weighing strong economic data, some signs of a slowdown and the impact of higher long-term bond yields as they considered whether they would need to raise rates further to reduce inflation.

Focus now turns to Fed Chairman Powell’s speech later on Wednesday.

“There is a risk that we could see further strength in the US dollar today provided Powell and (company) continue to remind markets of their ‘higher for longer’ story,” Simpson said.

euro EUR = EBS fell 0.07% to $1.0691, further weighed down by a worsening outlook for growth in the eurozone. Data from Tuesday showed German industrial production in September they fell more than expected.

“The mixed outlook for consumer and investment spending leaves the eurozone very close to recession,” Wells Fargo economist Nick Bennenbroek said.

“Regardless of whether the eurozone slips into recession, we see enough headwinds to growth to suggest that the European Central Bank’s monetary tightening is done.”

down under Australian dollarAUD=D3 was struggling at $0.6425 after falling 0.8% in the previous session, its biggest daily decline in about a month.

The Reserve Bank of Australia (RBA) on Tuesday raised interest rates to a 12-year high, ending four months of steady policy, but tempered its tightening tendencies to be more contingent on incoming data.

“We do not expect the RBA to follow through with another rate hike in December,” Westpac chief economist Luci Ellis said.

“The last paragraph of the statement contained a shift in language … It sounds like the board hopes it won’t have to raise rates again, but is very willing to do so if things change. There’s not enough new information between now and then.” A December meeting that will lead to a change in perspective.”

New Zealand dollar NZD=D3 similarly, it fell 0.12% to $0.5928.

World exchange rates

(Reporting by Rae Wee; Editing by Lincoln Feast.)

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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.

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