Economy

Dollar slips as the odds mount for a less hawkish Fed, euro at parity By Stocksak


© Stocksak. FILEPHOTO: This illustration photo was taken May 7, 2017, and shows U.S. dollar bank notes and Euro bank notes in Frankfurt, Germany. May 7, 2017. REUTERS/Kai Pfaffenbach/Illustration/File Photo

By Rae Wee

SINGAPORE, (Stocksak), – On Thursday, the dollar fell as investors expected that the Federal Reserve would ease down on its aggressive stance in interest rate hikes. The euro rose further above parity and lifted its other major peers to new multi-week highs.

In early Asia trade, the euro reached $1.00935 and sterling $1.1645, their highest levels since Sept. 13.

Sterling was not helped much by the delay by the British government in announcing their plan to repair the country’s finances to Nov. 17. This was on the basis that the programme would reflect the most current economic forecasts.

The greenback fell 0.2% to 146.11 against the Japanese currency.

Rodrigo Catril of National Australia Bank (OTC): “Our sense is, fundamentally, there’s still factors that favor the U.S. dollars: rate differentials. The fact that the Fed still possesses more work to do.”

“But in the near term, considering how much was priced. We’ve seen a little retracement of the dollar… Our perception is that it’s a consolidation of recent moves and not an extension of further dollars declines.”

Markets are anticipating another 75 basis-point hike at the FOMC meeting next week, but sentiment is building that they will opt for a smaller increase in December.

This week’s housing data revealed that U.S. single family home prices fell in August and that sales of new single-family homes fell in September. This further supports the claim that the Fed’s aggressive tightening cycle has already helped slow the economy.

Overnight, the Bank of Canada announced a smaller-than-expected interest rate hike and said it was getting closer to the end of its historic tightening campaign.

The Canadian dollar traded at 1.3549 for the last time.

The currency basket was up 0.06% at 109.53, following a 1.1% drop overnight.

Thursday’s focus will be on the European Central Bank rate decision. Markets are expecting it to raise its rate by 75 basis points.

Catril of National Australia Bank stated, “Whatever the ECB tells us will be important.”

“The question is if they want… to show that full commitment to the inflation mandate or whether they show weakness in terms of what seems to be a difficult growth outlook.”

The stock was 0.12% lower at $0.6487, reducing some of its gains from the 1.6% overnight surge.

The price of the currency rose to $0.58505, which was its highest in over a month. It was also up 0.19% at $0.5842.

Wednesday’s data showed that Australian inflation rose to a 32-year peak in the last quarter. This shock result fueled pressure for more aggressive rate increases by the central bank.

Thursday’s Westpac statement stated that it had raised its terminal rate expectations to 3.85% in March from 3.6%. It also expects the Reserve Bank of Australia will raise its cash rates by 50 basis points in November.

News Source and Credit

Stocksak Editorial

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