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Dollar Up, RBA Keeps Interest Rate Unchanged in Latest Policy Decision

By Gina Lee

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Dollar Up, RBA Keeps Interest Rate Unchanged in Latest Policy Decision
© Reuters.

By Gina Lee

Investing.com – The dollar was up on Tuesday morning in Asia, remaining below recent highs as the Reserve Bank of Australia (RBA) led key central banks in handing down their policy decisions.

The that tracks the greenback against a basket of other currencies inched up 0.04% to 93.918 by 11:50 PM ET (3:50 AM GMT).

The pair inched down 0.05% to 113.92.

The pair was down 0.31% to 0.7501 and the pair inched down 0.10% to 0.7174.

The pair inched up 0.05% to 6.4005 while the pair edged down 0.16% to 1.3651.

The kept its November interest rate at 0.10% as it handed down its policy decision earlier in the day. The decision comes as the central bank failed to defend its yield target as bonds sold off over recent sessions, and the Reserve Bank of New Zealand is likely to track its Antipodean counterpart’s moves in its next policy decision.

Other central banks could take their cues from the RBA decision, with the and handing down their policy decisions on Wednesday and Thursday respectively. All three face the common dilemma of surging inflation.

“The elephant in the room is headline and underlying inflation, which are higher than the (Fed) was anticipating. We expect the Fed to state that it is ready to act decisively if inflation is not moving towards target levels when asset tapering ends, but it still expects inflation to fall as supply constraints ease,” Standard Chartered (OTC:) head of G10 FX Steve Englander told Reuters.

“We think investors will see this as advancing the likely timing of Fed rate hikes. We also expect FX markets to react to the implied Fed threat of rates moving off zero but discount inflation optimism. This adds up to a dollar-positive combination of higher real rates and increased risk-off positions.”

Meanwhile, trader positioning is indicative of bets on higher rates, as speculators crowd in to short the yen.

“That’s a bet that interest rate trends will continue to move against the yen as they rise elsewhere, particularly in the U.S.,” Societe Generale (OTC:) strategist Kit Juckes told Reuters.

“In other words, there’s a majority that thinks the bond sell-off isn’t over yet. It’s also, to a smaller extent, a bet that risk sentiment will survive the experience.”

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Forex

China stock market closed in the red amid protests in China

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China stock market

The Chinese stock market chart closed in the red, recording its worst session in a month, as recent measures to ease monetary policy could not offset investor concerns about protests against tight covenant restrictions in the world’s second-largest economy.

China once again recorded record numbers of coronavirus infections on Monday following protests across the country against strict covid restrictions.

Amid concerns, investor sentiment on China’s stock market couldn’t be much affected by the People’s Bank of China, which said on Friday it will lower requirements on the amount of funds banks must hold as reserves for the second time this year, freeing up about 500 billion yuan ($69.8 billion) of long-term liquidity to support the slowing economy.

In turn, consumer and tourism-related stocks rose, as some investors bet that the recent COVID-19 outbreaks and social unrest could push China to end its “zero tolerance” COVID-19 policy earlier.

Earlier we reported that the gold price was showing moderate gains in reaction to the US Federal Reserve meeting minutes.

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Forex

Gold price today shows moderate growth, reacting to U.S. Federal Reserve meeting minutes

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forex gold price

Gold prices today are rising, trading data show. Markets are processing the minutes of the November meeting of the U.S. Federal Reserve (Fed).

Forex gold price on the New York Comex rose $8.35, or 0.48%, to $1,753.95 a troy ounce. December silver futures rose 0.44% to $21.46 an ounce.

Investors pay attention to the minutes of the Federal Reserve meeting published this week. The document indicated that the regulator considers it expedient to slow down the rate of interest rate increases soon. According to the CME Group, 71.1% of analysts forecast a new 50 basis point hike in December after a 75-point increase in November.

The monetary policy easing is having a negative impact on the dollar. The dollar index (the exchange rate against a basket of currencies of six U.S. trading partners) is down nearly 1% for the week. The cheaper the U.S. currency, the more expensive gold becomes as it becomes more available for purchase in other currencies. The yellow metal has been showing a rise of about 1% since Monday.

Earlier we reported that the U.S. dollar is stable against the euro and yen and rising against the pound.

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Forex

The US dollar rate is stable against the euro and the yen and goes up against the pound

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us dollar rate

In today’s trading the US dollar rate is stable against the euro and the yen and is strengthening against the pound. A day earlier, the dollar weakened against the world’s major currencies following the release of the Federal Reserve’s (Fed) November meeting minutes, which showed that the overwhelming majority of U.S. central bankers see the need to slow down the pace of rate hikes soon.

The ICE index that shows the dollar’s movement against six currencies (euro, Swiss franc, yen, Canadian dollar, pound and Swedish krona) lost 0.17% on Friday, while the broader WSJ Dollar Index was stable.

Current dollar rate

The euro/dollar pair was trading at $1.0411, up from $1.0410 at the close of the previous session. The dollar was trading at 138.61 yen against the Japanese yen at the same time, compared to 138.54 yen the previous day. The pound exchange rate fell to $1.2103, compared to $1.2113. Yesterday the dollar was 0.2% cheaper against the euro, 0.7% cheaper against the yen, and 0.5% cheaper against the pound.

“Some of the Fed leaders observed that monetary policy had reached a state in which it was sufficiently restrictive to meet FOMC goals and it would be appropriate to slow rate hikes. The vast majority of meeting participants felt that slowing the pace of the hike would probably be appropriate in the near term,” noted the minutes of the Nov. 1-2 Fed meeting.

Some of the U.S. central bank leaders, meanwhile, believed that the Fed would have to raise the rate higher than previously planned to meet its goal of easing inflation.

They indicated that the rate “would have to reach a somewhat higher level than previously expected,” given the lack of enough signals of easing in U.S. inflation at the moment, as well as the continuing imbalance of supply and demand in the economy.

Earlier we reported that Italian Enel plans to sell assets for 21 billion euros to reduce debt.

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