Forex
US dollar rally pauses, but uptrend intact; set for 3rd weekly gain
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The U.S. dollar fell on Friday, taking a breather after five straight days of gains, as risk appetite increased following yet another round of stimulus measures from China that bolstered global equities led by Chinese stocks.
Investors cheered the Chinese government’s launch of two funding schemes to help boost its stock market. Chinese equities rallied as a result, lifting other stock markets as well, including the and the Nasdaq.
That elevated the as well and boosted commodity currencies such as the Australian and Canadian dollars at the expense of the safe-haven greenback.
The , measuring the U.S. unit’s value against six major currencies, however, was on track for its third weekly gain, currently up 0.6% this week. It has risen about 2.7% so far this month, its largest monthly gain since February 2023.
The index was last down 0.3% at 103.49, its largest daily fall since late September.
“Today’s pullback in the dollar was more China-driven. Last night, China launched measures to support the stock market,” said Erik Bregar, director, FX & precious metals risk management, at Silver Gold Bull in Toronto.
“That boosted Chinese stocks and risk sentiment more broadly and put pressure on dollar/yuan, which in turn helped lift euro/dollar. That started the dollar pullback.”
Friday’s price action for the U.S. dollar, however, was likely temporary, Bregar said.
The biggest support for the dollar over the last few weeks has been a shift in Federal Reserve policy expectations to a more moderate easing phase, after a slew of generally solid U.S. economic data. The Fed slashed benchmark rates by a supersized 50 basis points (bps) in September, prompting the rate futures market at that time to price in another jumbo move this year.
“Speculation that the Fed could follow September’s 50 bps rate cut with another similarly sized move has been blown away by a round of data pointing to a resilient U.S. economy,” wrote Jane Foley, head of FX strategy, at Rabobank in London.
“Instead, talk has emerged that the FOMC might be minded to cut rates only once more before the end of the year.”
U.S. rate futures have priced in a 95% chance that the Fed will cut rates by 25 bps next month, and a 5% probability that it will pause, or keep the fed funds rate at the 4.75%-5% target range, according to LSEG estimates. They had previously seen a further 50-bps cut likely at one of these meetings.
The futures market also expect about 45 bps cut for 2024, and an additional 104 bps reductions next year.
RISING TRUMP ODDS
In afternoon trading, the dollar slid 0.5% against the yen to 149.51. It has advanced about 0.8% on the week, however, versus the Japanese currency having broken above the 150 level on Thursday for the first time since early August. The U.S. currency also climbed 4.6% in October, its best monthly showing since February last year.
Adding to the dollar’s overall shine was the rising prospect of former President Trump winning the November election, since his proposed tariff and tax policies are seen as likely to keep U.S. interest rates high.
The dollar fell further versus the Japanese currency after data showed U.S. housing starts dropped 0.5% to a 1.354 million pace in September, after rising by a hefty 7.8% to 1.361 million in August.
The euro, meanwhile, rose 0.3% against the dollar to $1.0865, rising for the first time in eight days, and on track for its largest daily gain since Sept. 26. It was down 2.7% so far this month, on pace for its biggest monthly decline since May 2023.
It benefited on Friday from the Chinese stimulus news, after the European Central Bank cut euro zone interest rates by a quarter point on Thursday, in line with expectations. Traders are now pricing in back-to-back rate cuts at the ECB’s upcoming meetings.
In Asia, the rose against the dollar, which fell 0.3% to 7.1177 yuan. The Australian dollar, often used as a liquid proxy for the Chinese unit, was up 0.1% at US$0.6704.
The pound was one of the stronger performers against the dollar, rising 0.2% to $1.3042 after UK data showed retail sales grew more than expected in September, offering investors some reassurance about the strength of the British economy.
In cryptocurrencies, bitcoin got a lift from Trump’s rising prospects in the U.S. presidential elections since his administration is seen as taking a softer line on cryptocurrency regulation. It was last up 2.8% at $68,781 , and has been up more than 10% since Oct. 10.
Currency
bid
prices at
18
October
07:33
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 103.49 103.78 -0.27% 2.09% 103.78 103.
index 45
Euro/Doll 1.0864 1.0831 0.31% -1.57% $1.0868 $1.0
ar 826
Dollar/Ye 149.53 150.245 -0.48% 6.01% 150.18 149.
n 445
Euro/Yen 1.0864 162.67 -0.13% 4.39% 162.84 162.
21
Dollar/Sw 0.8653 0.866 -0.06% 2.83% 0.8669 0.86
iss 5
Sterling/ 1.3042 1.3011 0.24% 2.49% $1.307 $1.3
Dollar 012
Dollar/Ca 1.3807 1.3795 0.1% 4.17% 1.3815 1.37
nadian 85
Aussie/Do 0.6702 0.6696 0.1% -1.69% $0.6719 $0.6
llar 695
Euro/Swis 0.9401 0.938 0.22% 1.24% 0.9406 0.93
s 78
Euro/Ster 0.8329 0.8323 0.07% -3.91% 0.8336 0.82
ling 96
NZ 0.6066 0.6061 0.12% -3.97% $0.6079 0.60
Dollar/Do 55
llar
Dollar/No 10.9248 10.912 0.12% 7.79% 10.9394 10.8
rway 594
Euro/Norw 11.8702 11.8234 0.4% 5.76% 11.881 11.7
ay 714
Dollar/Sw 10.5255 10.5372 -0.11% 4.55% 10.5493 10.5
eden 03
Euro/Swed 11.4361 11.4144 0.19% 2.79% 11.4435 11.3
en 86
Investing.com – The U.S. dollar edged higher Monday, retaining recent strength as the US presidential election draws near and polls point to a rising likelihood of former President Donald Trump prevailing.
At 04:30 ET (08:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher to 103.462, after posting gains of around 0.6% last week.
Dollar boosted by Trump confidence
The dollar remained near its highest levels for over two months, boosted by increasing conviction that U.S. interest rates will fall at a slower pace than initially expected, especially as recent data showed the U.S. economy remained relatively healthy.
The showed traders have largely cemented a 25 basis point rate cut by the Federal Reserve in November.
The greenback has also been boosted by increased expectations that Donald Trump will defeat Kamala Harris in the 2024 presidential election, which is less than two weeks away.
Trump’s proposed tariff and tax policies are seen as likely to keep U.S. interest rates high and undermine currencies of trading partners.
“FX markets seem to be positioning for a Trump victory in next month’s US presidential election. October seems to have been a good month for Donald Trump in opinion polls and the dollar is bid across the board,” said analysts at ING, in a note.
Euro hit by weak German PPI
In Europe, edged 0.1% lower to 1.0850, after German producer prices fell more than expected in September, declining 1.4% year on year, instead of the 1.0% anticipated.
The European Central Bank is likely to cut its key interest rate down to its “natural” level between 2% and 3% but it may need to reduce it even further if a fall in inflation becomes entrenched, ECB policymaker Gediminas Simkus said on Monday.
“If the disinflation processes get entrenched… it’s possible that rates will be lower than the natural level,” Simkus, the Lithuanian central bank governor, told reporters in Vilnius.
fell 0.2% to 1.3022, after data showed that asking prices for British homes rose only 0.3% in October, well below their average for a 1.3% monthly increase for the month, according to property website Rightmove (OTC:).
This, along with the surprise fall in services inflation last week, points to back-to-back rate cuts by the Bank of England in the upcoming months as the central bank attempts to stimulate the British economy.
Yuan slips after PBOC cuts rates
rose 0.2% to 7.1120, after the PBOC cut its benchmark loan prime rate by 25 basis points, with Monday’s cut coming amid a flurry of recent stimulus measures from Beijing.
China has announced its most aggressive round of stimulus measures yet over the past month, outlining both monetary and fiscal measures to shore up sluggish growth.
rose 0.3% to 149.91, but remained below 150 after having breached that key level briefly last week for the first time since early August.
Investing.com– Most Asian currencies moved in a tight range on Monday, with the yuan steady after the People’s Bank cut interest rates slightly more than expected, while the dollar remained near recent peaks.
Regional currencies were nursing losses over the past few weeks as expectations of smaller U.S. interest rate cuts buoyed the dollar, as did signs of resilience in the U.S. economy.
The greenback hit an over 2-½ month high, with risk aversion before the U.S. elections also supporting the currency.
Middling signals on Chinese stimulus also weighed on sentiment towards regional markets, while doubts over the Bank of Japan’s capacity to raise interest rates further kept the yen close to recent lows.
Chinese yuan steady after loan prime rate cut
The yuan’s pair hovered around 7.1019 yuan on Monday, following a strong midpoint fix from the People’s Bank.
The PBOC cut its benchmark by slightly more than expected, with Monday’s cut coming amid a flurry of recent stimulus measures from Beijing.
China announced its most aggressive round of stimulus measures yet over the past month, outlining both monetary and fiscal measures to shore up sluggish growth. This also made Monday’s rate cut largely expected by markets.
But lower rates and more fiscal spending herald increased pressure on the yuan, especially with U.S. interest rates likely to remain higher than initially expected.
Still, the prospect of more Chinese stimulus buoyed currencies with exposure to the country. The Australian dollar’s pair rose 0.1%, while the Taiwan dollar’s pair fell 0.4%.
Other Asian currencies also saw some strength after recent losses. The Japanese yen’s pair fell 0.3%, but remained close to 150 yen, while the South Korean won’s pair was flat.
The Singapore dollar’s pair fell slightly, while the Indian rupee’s pair remained above 84 rupees.
Dollar steady near more than 2-½ mth high
The and both fell slightly in Asian trade, but remained close to their strongest levels since early-August.
The greenback was boosted by increasing conviction that U.S. interest rates will fall at a slower pace than initially expected, especially as recent data showed the U.S. economy remained strong. showed traders squarely positioned for a 25 basis point rate cut by the Federal Reserve in November.
The greenback also saw safe haven plays with less than three weeks left until the 2024 presidential elections. Recent polls pointed to a tight race between Kamala Harris and Donald Trump.
Investing.com — The dollar has enjoyed a boost from the return of the “Trump trade” as Republican presidential candidate Donald Trump’s chances of returning to the White House appear to be on the up, but UBS believes stronger rallies should be sold as Trump isn’t an outright positive for the greenback.
“We continue to expect a dollar bounce in case of a Trump victory. However, we don’t see Trump as outright USD-positive over the medium term and therefore advise selling stronger dollar-rallies,” UBS said in a note on Friday.
The call comes as the U.S. election, just over two weeks away, remains too close to call, though Trump has gained ground in recent weeks and now has a slim lead over Vice President Kamala Harris in some polls.
The recent dollar rally has been attributed in part to the market pricing in a higher likelihood of a Trump victory, with the greenback seen as one of the so-called Trump-trades that have gained traction.
The boost to the dollar from the “Trump-trades” may prove fleeting, UBS says, forecasting the euro-dollar to move toward 1.16 in 2025, suggesting limited upside for the greenback over the longer term.
In the broader currency market, meanwhile, some emerging market currencies, which have struggled in the recent weeks against the dollar, are likely to remain in favor.
“We think the South African rand, supported by a more reform-minded government, and the Mexican peso, which already prices in a hefty risk premium for political turmoil, are good options to collect carry over the medium term,” UBS said.
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