© Reuters. FILE PHOTO: Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/File Photo
By Gertrude Chavez-Dreyfuss and Saqib Iqbal Ahmed
NEW YORK (Reuters) -The U.S. dollar eased against a basket of currencies on Friday, as investors assessed Friday’s jobs report that showed U.S. hiring rose broadly in September but also that wage growth is slowing.
The , which measures the currency’s strength against a basket of six rivals, was down 0.31% to 106.03.
The index rose as high as 106.98 earlier in the session after data showed U.S. nonfarm payrolls increased by 336,000 jobs last month. The numbers for August were revised higher to show 227,000 jobs added instead of the previously reported 187,000. Economists polled by Reuters had forecast September payrolls rising by 170,000 jobs.
“This morning’s data pushed expectations for the first rate cuts further into late 2024, but failed to convince market participants of another hike this year, meaning that short-term yields – which play a dominant role in driving foreign exchange moves – remained relatively stable,” Karl Schamotta, chief market strategist at Corpay in Toronto, said.
Post-payrolls, U.S. rate futures priced in a 42% chance of a rate increase by the end of the year, up from about 33% on Thursday, according to the CME’s FedWatch tool.
The dollar’s recent strength has been underpinned by a rapid sell-off in U.S. government bonds, which sent yields to multi-year highs.
While benchmark 10-year notes reached 4.887% and 30-year yields hit 5.053%, both the highest since 2007, two-year notes rose as high as 5.151%, holding below the 5.202% level hit on Sept. 21.
The payrolls data showed monthly wage growth remained moderate, with average hourly earnings rising 0.2% after a similar gain in August. In the 12 months through September, wages increased 4.2% after advancing 4.3% in August.
“When we go through the report today, average hourly earnings are probably soft enough that the Fed doesn’t need to hike, but we’ll see what happens with inflation, I think it still keeps that on the table,” Tony Welch, chief investment officer at SignatureFD in Atlanta, said.
For the week, the dollar index was down 0.1%, set to snap an 11-week streak of gains that has helped it advance about 6%.
“(It’s) a small bit of profit taking,” Helen Given, FX Trader at Monex USA, said of the dollar’s reversal on Friday.
Attention now turns to next week’s U.S. inflation data that could offer clues to Fed action going forward.
“If next week’s U.S. consumer price data pushes yields even higher, we should see safe-haven flows beginning to add to rate differentials in supporting the greenback,” Corpay’s Schamotta said.
Against the yen, the dollar was 0.54% higher at 149.31 yen, hovering close to the 150 mark that traders have been on watch for weeks for a possible intervention by Japanese officials to combat a sustained depreciation in the yen.
The pound was up 0.43% at $1.22445, set to close the week on an upbeat note, a positive sign that backed the idea of a larger rebound for the British currency.
Asia FX muted with nonfarm payrolls in sight; Yen scales 4-mth peak
Investing.com – Most Asian currencies moved little on Friday as traders positioned for a potentially softer U.S. nonfarm payrolls reading, while the yen sat near a four-month high to the dollar tracking hawkish signals from the Bank of Japan.
The was the best-performing Asian currency this week, up over 2% after BOJ Governor Kazuo Ueda signaled that the central bank was considering an eventual move away from negative interest rates.
The yen rose 0.2% to 143.88 against the dollar on Friday.
Ueda’s comments, made during an address on Thursday, sparked a sharp reversal in bets for more weakness in the yen, while reinforcing expectations that the BOJ will end its negative rate regime in 2024.
This helped the yen strengthen past data showing that Japan’s in the third quarter. Ueda also noted that policy will remain loose in the near-term to keep supporting the Japanese economy.
Dollar weakens as markets bet on softer nonfarm payrolls
Broader Asian currencies were muted, while the dollar reversed a recent rebound following a string of soft labor market readings this week.
The and steadied in the mid-103s in Asian trade, after falling sharply on Thursday.
and readings suggested that the U.S. labor market was cooling, potentially setting the scene for a softer reading for November, which is due later in the day.
Any signs of a cooling labor market give the Federal Reserve less impetus to keep interest rates higher for longer. Friday’s reading also comes just days before the for the year, where the central bank is expected to keep rates on hold.
But markets were still seeking more cues on when the Fed could begin cutting rates in 2024. Expectations that had boosted Asian currencies in recent sessions.
Most regional units moved little in anticipation of the payrolls reading. The fell 0.1%, and was set for mild weekly losses amid persistent concerns over an economic slowdown in China. Dollar selling by Chinese state banks helped limit losses in the yuan this week.
The was flat after the kept rates on hold as widely expected, and said that monetary policy will remain restrictive to curb persistent risks from inflation.
The rose 0.2%, but was set to lose 0.8% this week following a string of weak economic readings. A slowdown in China, Australia’s biggest export market, appeared to be spilling over into the country.
Dollar at 2-week high, euro softer as market bets on rate cuts
© Reuters. U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
By Hannah Lang
WASHINGTON (Reuters) -The U.S. dollar was at a two-week high on Wednesday, while the euro was weak across the board as markets ramped up bets that the European Central Bank (ECB) will cut interest rates as early as March.
Although markets are still pricing at least 125 basis points of interest rate cuts from the U.S. Federal Reserve next year, the dollar was able to hold steady as rate cut bets for other central banks intensified.
The , which measures the currency against six other majors, was last up 0.19% at 104.16. The euro was down 0.29% to $1.0764.
Traders are betting that there is around an 85% chance that the ECB cuts interest rates at the March meeting, with almost 150 basis points worth of cuts priced by the end of next year. Influential ECB policymaker Isabel Schnabel on Tuesday told Reuters that further interest rate hikes could be taken off the table given a “remarkable” fall in inflation.
The euro also touched a three-month low against the pound, a five-week low versus the yen and a 6-1/2 week low against the Swiss franc.
“It’s a reasonably sized sell-off and the market is trying to digest, is it just a correction? Did the market get over-exuberant in the previous weeks? I think there is definitely an element of that,” said Amo Sahota, director at FX consulting firm Klarity FX in San Francisco.
‘A BIT OVERBOARD’
The ECB will set interest rates on Thursday next week and is all but certain to leave them at the current record high of 4%. The Fed and Bank of England are also likely to hold rates steady next Wednesday and Thursday respectively.
The Bank of Canada on Wednesday held its key overnight rate at 5% and, in contrast to its peers, left the door open to another hike, saying it was still concerned about inflation.
Traders have priced around a 60% chance of the U.S. central bank cutting rates in March, according to CME’s FedWatch tool.
“Markets have aggressively priced in rate cuts, without any kind of confirmation from central banks,” said Adam Button, chief currency analyst at ForexLive in Toronto. “As December continues, we need either a change in tune from central bankers or a repricing in markets.”
If the Fed were to cut rates as markets expect, it could result in the dollar loosening its grip on other G10 currencies next year, dimming the outlook for the greenback, according to a Reuters poll of foreign exchange strategists.
The spotlight in Asia was on China, as markets grappled with rating agency Moody’s (NYSE:) cut to the Asian giant’s credit outlook.
The offshore was flat at $7.1728 per dollar, a day after Moody’s cut China’s credit outlook to “negative”.
China’s major state-owned banks stepped up U.S. dollar selling forcefully after the Moody’s statement on Tuesday, and they continued to sell the greenback on Wednesday morning, Reuters reported.
Elsewhere in Asia, the Japanese yen weakened 0.15% versus the greenback at 147.38 per dollar. The Australian dollar fell 0.02% to $0.65495.
In cryptocurrencies, bitcoin eased 0.06% to $44,049, still near its highest since April 2022.
The world’s largest cryptocurrency has gained 150% this year, fueled in part by optimism that a U.S. regulator will soon approve exchange-traded spot bitcoin funds (ETFs).
Canadian dollar forecasts turn less bullish as BoC rate cuts eyed: Reuters poll
© Reuters. FILE PHOTO: A Canadian dollar coin, commonly known as the “Loonie”, is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch/File Photo
By Fergal Smith
TORONTO (Reuters) – Analysts see less upside for the Canadian dollar than previously thought over the coming year as recent data showing a slowdown in the domestic economy brings forward the expected start of Bank of Canada interest rate cuts, a Reuters poll found.
The median forecast of 35 foreign exchange analysts surveyed in the Dec. 1-5 poll was for the Canadian dollar to strengthen 0.4% to 1.3533 per U.S. dollar, or 73.89 U.S. cents, in three months, compared with 1.3450 in a November poll.
It was then expected to advance to 1.3130 in a year, versus 1.3000 in last month’s forecast.
“Our view is the Canadian dollar is going to face a difficult next three months as the data starts to look like the Canadian economy is teetering on the edge of recession if not in a mild recession,” said Simon Harvey, head of FX analysis for Monex Europe and Monex Canada.
The Canadian economy unexpectedly contracted at an annualized rate of 1.1% in the third quarter, avoiding a recession after an upward revision to the previous quarter but showing growth stumbling.
Soft domestic data “should bring forward expectations of BoC easing, especially relative to the Federal Reserve,” Harvey said. “Earlier Bank of Canada easing is going to widen rate differentials in favor of USD-CAD.”
Money markets expect the Canadian central bank to leave its benchmark interest rate on hold at a 22-year high of 5% at a policy announcement on Wednesday and then begin easing policy as soon as March. As recently as October, there were no rate cuts priced in for 2024.
A separate Reuters poll, from last week, showed economists expect the BoC to start cutting rates in the second quarter of next year and borrowing costs will drop by at least one percentage point by the end of next year.
The Canadian 2-year yield has fallen further below its U.S. equivalent in recent weeks to a gap of 54 basis points, which is the widest since March.
A lower yield tends to make a currency less attractive to investors.
(For other stories from the December Reuters foreign exchange poll:)
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