Dollar is on the decline; possible intervention, Fed pivot weighs by

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By Peter Nurse The U.S. Dollar fell in European trading on Wednesday morning, trading close to a three-week low. This was due to traders reacting to U.S. economic weakness and possible intervention in Asia. 

At 02:55 ET (06:55 GMT), , which tracks the greenback against a basket of six other currencies, fell 0.2% to 110.638, just above the session’s low of 110.612, the weakest since Oct. 5.

The most recent economic U.S. data was released Tuesday and showed that the U.S. suffered in August because of rising mortgage rates.

Following on from Monday’s indicating that U.S. business activity contracted for a fourth straight month, the signs are building that the aggressive rate hikes by the Federal Reserve are already having a damaging impact on the world’s biggest economy.

It is widely expected that the Fed will authorize another 75 basis points increase next Wednesday. However, it is becoming increasingly clear that any future increases will be smaller in magnitude.

The, on the other hand, is expected to keep its loose policy settings unaffected by Friday’s vote. This has hurt the yen.

The price remained largely unchanged at 147.34, after a move through 150 which resulted into suspected intervention by BoJ on Friday and Monday.

“However, neither of the above factors may keep the dollar in check for long,” said analysts at ING, in a note. “On the former, the BoJ meets to set monetary policy this Friday and unless we see a shift in its ultra-dovish outlook (a negative policy rate and ongoing quantitative easing) it seems hard to expect a top in USD/JPY anytime soon. Equally on the Fed side, this week’s U.S. data calendar should maintain a hawkish Fed.” 

However, it seems that the Chinese authorities are also joining the intervention club. Stocksak reports that a number Chinese state-owned bank sold U.S. Dollars in late trade Tuesday to support the weakening of the yuan.

Concerns over China’s political climate saw the yuan fall sharply this week, with Beijing reiterating its commitment to maintaining its strict zero-COVID policy, while the country’s third-quarter GDP data underwhelmed.

Elsewhere the stock market rose 0.2%, to 1.1486, continuing in the wake of Rishi Sunak being appointed Britain’s next leader. This is in addition to Liz Truss’ perceived fiscal prudence.

“After the failed experiment with Trussonomics, the challenge facing the new team will be harder than the one that existed earlier this summer and probably a reason why international investors will not want to chase GBP/USD above the 1.15 level,” ING added.

rose 0.2% to 0.9979, near a six-week high, helped by rising to 82 in October, climbing above the previous month’s 79 reading.

The policy decision is made by the Fed on Thursday. It is widely expected that rates will increase by 75 basis point.

The index rose 0.6% to 0.6432, its highest level since Oct. 7, when hot figures earlier in week increased pressure for the to maintain an aggressive monetary stance at its meeting next Wednesday. It also rose 0.4% to 0.5775

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