© Reuters. U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File photo
By Karen Brettell and Samuel Indyk
NEW YORK/LONDON (Reuters) – The dollar gained on Tuesday after data showed that U.S. retail sales rose more than expected in September, with investors also focused on a busy week of speeches by Federal Reserve officials.
Retail sales rose 0.7% last month as households boosted purchases of motor vehicles and spent more at restaurants and bars.
“The whole idea of the U.S. economy slowing down in Q4 was that the consumer would pull back, and they ended Q3 on a very strong note,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
That said, “we haven’t seen as big of a rally in the dollar as one might have expected on such a strong retail sales number,” he added.
The was last up 0.16% at 106.40. It is holding below the 107.34 level reached on Oct. 3, the highest since November 2022.
The euro fell 0.11% to $1.0548. It is up from $1.0448 on Oct. 3, the lowest since December 2022.
Investors are focused on speeches this week by Fed officials, including Fed Chair Jerome Powell on Thursday, for further clues about interest rate policy.
The officials will enter a blackout period on Oct. 21 before the Fed’s Oct. 31 – Nov. 1 meeting.
Traders are evaluating whether the U.S. central bank may hike rates again as it battles to bring inflation closer to its 2% annual target.
Fed funds futures traders are pricing in a 43% chance of an additional interest rate hike this year, but only 12% odds of a rate increase next month, according to the CME Group’s (NASDAQ:) FedWatch Tool.
The yen briefly surged but quickly trimmed gains after a media report that the Bank of Japan was considering raising its core CPI forecast for the 2023 and 2024 fiscal years but maintaining the inflation outlook for 2025.
The yen was last 149.77 per dollar, having strengthened to 148.75 after the report, as analysts said the knee-jerk reaction to higher inflation forecasts in the near term was negated by the longer-term projections.
“Central banks are not trying to hit the CPI targets in the near term,” said Colin Asher, senior economist at Mizuho.
“For my part, I see a decent risk that the BoJ is underestimating the risks of the CPI remaining elevated into FY25, which is one reason why I expect that the BoJ will be forced to tighten policy in the New Year,” Asher added.
Investors were also on edge for any signs of intervention by the Japanese authorities as the yen traded close to the 150 level that prompted officials to step in to buy the currency in 2022.
Japan’s top financial diplomat Masato Kanda said on Monday the yen was still perceived as a safe-haven asset like the dollar and the Swiss franc despite its recent weakness, and was benefiting from demand due to the conflict in the Middle East.
LOONIE, POUND DIP AS DATA DAMPENS HIKE EXPECTATIONS
The Canadian dollar weakened after Canada’s annual inflation rate unexpectedly slowed to 3.8% in September and underlying core measures also eased, prompting markets and analysts to trim bets for another interest rate hike next week.
The U.S. dollar was last up 0.40% at 1.366 Canadian dollars.
The pound dipped after growth in British workers’ regular pay slowed from a previous record high and job vacancies also dropped, although the publication of some labour market data, including the unemployment rate, was delayed until next week.
Sterling was last at $1.2147, down 0.56% on the day, after jumping 0.6% on Monday.
The New Zealand dollar fell 0.79% to $0.5882 after data on Tuesday showed consumer inflation hit a two-year low, reducing expectations the central bank will hike the cash rate further in November.
Currency bid prices at 10:00AM (1400 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Dollar index 106.4000 106.2600 +0.16% 2.812% +106.5200 +106.1000
Euro/Dollar $1.0548 $1.0561 -0.11% -1.55% +$1.0579 +$1.0533
Dollar/Yen 149.7700 149.5150 +0.18% +14.24% +149.7900 +148.7500
Euro/Yen 157.98 157.87 +0.07% +12.60% +158.1000 +157.2500
Dollar/Swiss 0.9022 0.9003 +0.21% -2.44% +0.9032 +0.8997
Sterling/Dollar $1.2147 $1.2217 -0.56% +0.45% +$1.2217 +$1.2134
Dollar/Canadian 1.3666 1.3612 +0.40% +0.86% +1.3703 +1.3606
Aussie/Dollar $0.6344 $0.6343 +0.03% -6.92% +$0.6367 +$0.6335
Euro/Swiss 0.9514 0.9504 +0.11% -3.85% +0.9519 +0.9499
Euro/Sterling 0.8681 0.8644 +0.43% -1.84% +0.8690 +0.8642
NZ $0.5882 $0.5929 -0.79% -7.36% +$0.5927 +$0.5872
Dollar/Norway 10.9830 10.9320 +0.57% +12.02% +11.0100 +10.9330
Euro/Norway 11.5921 11.5277 +0.56% +10.47% +11.6149 +11.5250
Dollar/Sweden 10.9494 10.9181 +0.27% +5.20% +10.9670 +10.8950
Euro/Sweden 11.5534 11.5228 +0.27% +3.62% +11.5580 +11.5170
China’s state banks seen supporting yuan as Moody’s cuts outlook – sources
© Reuters. FILE PHOTO: U.S. Dollar and Chinese Yuan banknotes are seen in this illustration taken January 30, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
SHANGHAI (Reuters) -China’s major state-owned banks were busy buying the yuan in currency markets on Tuesday to prevent it from weakening too much, two sources with knowledge of the matter said, with buying intensifying after rating agency Moody’s (NYSE:) cut China’s outlook to negative in the afternoon.
State banks were spotted swapping yuan for U.S. dollars in the onshore swap market and quickly selling those dollars in the spot market to support the yuan throughout the whole trading session, the sources said.
But the banks’ dollar selling became very forceful after the Moody’s statement, one source said.
China state banks have in the past year often sold dollars to slow the yuan’s decline against the U.S. dollar. Markets have often seen the moves as a sign of official attempts to relieve pressure on the currency, though banks could also be trading for their own accounts.
Moody’s on Tuesday cut its outlook on China’s government credit ratings to negative from stable, citing expectations of lower medium-term economic growth and risks from a deep correction in the country’s vast property sector.
With China’s economy sputtering and the U.S. dollar surging until recently, the yuan has had a volatile year, having weakened 6.14% to the dollar at one point before giving back much of the losses on recent views that U.S. interest rates have peaked.
The yuan strengthened 2.55% in November, its best month this year, but it is still down 3% year-to-date.
However, some analysts said the impact on the yuan from the Moody’s decision will not be sustainable.
“The issues plaguing the property sector are not new,” said Khoon Goh, head of Asia research at ANZ.
“The steps taken by the authorities recently should see a bottom soon. The upcoming U.S. data will be more important for the near-term direction of the yuan,” Goh said, referring to a spate of government measures to revive the real estate market.
Dollar finds foothold ahead of jobs opening, services PMI data
Investing.com – The U.S. dollar stabilized in early European trade Tuesday, near a one-week high, as traders scaled back dovish Federal Reserve bets ahead of key economic data releases.
At 04:30 ET (09:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 103.559, after recording its weakest monthly performance in a year in November.
Greenback finds support ahead of key data
The dollar was on the backfoot for most of November as traders began pricing in bigger rate cuts by the Fed next year than by any other major central bank.
However, the greenback has found some support with traders scaling back those bets ahead of the release of a series of important data releases this week, starting later in the session with U.S. and , before the widely watched on Friday.
“We suspect markets may be positioning ahead of next week’s Fed meeting, when Chair Jerome Powell may insist on his pushback against rate cut bets,” said analysts at ING, in a note.
“Today, however, market moves will be heavily impacted by two important data releases: JOLTS job openings and the ISM services. The first probably holds the keys to a bigger market reaction, given the proximity to U.S. payrolls data and the fact that markets are anxiously waiting for signs of a decisive turn lower in the jobs market to jump on bearish dollar positions.”
Eurozone heading for recession
In Europe, edged lower to 1.0835, close to Monday’s three-week low, after the eurozone’s rose to 47.6, its best reading since July, from October’s near three-year low of 46.5, and above a 47.1 preliminary estimate.
While the downturn in the region’s business activity eased last month, it still suggested the bloc’s economy will contract again this quarter, pointing to a regional recession. Last quarter the contracted 0.1%, according to official data.
tumbled to 2.4% last month from above 10% a year earlier, putting it close to the ECB’s 2% inflation target.
The European Central Bank can take further interest rate hikes off the table given a “remarkable” fall in inflation and policymakers should not guide for rates to remain steady through mid-2024, ECB board member Isabel Schnabel, a known hawk, said Tuesday.
fell 0.1% to 1.2624, retreating further from its recent three-month top of 1.2733.
Aussie dollar slumps after RBA meeting
In Asia, fell 0.6% to 0.6581 after the held its benchmark interest rate steady at 4.35%, after hiking by 25 basis points in October.
Governor Michele Bullock said that the bank needed more economic cues before considering any more changes to monetary policy, but warned that inflation risks still persisted.
traded 0.1% lower to 147.07, some distance away from the three-decade low of 151.92 it touched in the middle of November, even as growth in the country’s services sector missed expectations in November.
traded largely unchanged at 7.1418, even as a showed the country’s services sector grew more than expected in November. But the yuan was presented with new downside risks from growing fears of another epidemic in the country, as local media reports showed a spike in respiratory illnesses across major Chinese cities.
MUFG teams up with JPYC to enhance yen-backed stablecoin transactions
Mitsubishi UFJ Financial Group (NYSE:), one of Japan’s premier financial institutions, has entered into a partnership with JPYC Inc. to integrate the yen-backed stablecoin into its digital asset platform, Progmat. This move is aimed at streamlining services such as cross-border payments and comes as part of the financial giant’s broader strategy to embrace digital currency technology.
The collaboration was announced today and marks a significant step in the adoption of cryptocurrency in mainstream financial operations. Progmat, which was launched in September, is MUFG’s latest venture into the digital asset space, developed with the support of key partners like SBI Holdings and Mizuho Trust and Banking.
The integration of JPYC’s yen-backed stablecoin onto the Progmat platform is set against the backdrop of Japan’s evolving regulatory landscape for digital assets. Under new regulations, JPYC is preparing to issue a funds transfer stablecoin through Progmat while also transitioning to a trust-type stablecoin without transaction limits. This transition is subject to JPYC obtaining the necessary license, for which it has already applied, envisioning MUFG as the custodian bank holding the stablecoin reserves.
MUFG is also looking to facilitate currency conversions for Japanese users by enabling efficient exchanges between yen-backed stablecoins and their USD equivalents. This initiative follows MUFG’s research conducted in November on XJPY and , which investigated potential enhancements to settlement processes within the digital asset market.
The strategic alliance between MUFG and JPYC reflects a growing trend among traditional financial institutions to integrate cryptocurrency solutions into their service offerings. By doing so, they aim to provide customers with more flexible and efficient payment options that align with the global shift towards digital finance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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