Feb 6, 2024: The dollar declined broadly on Friday as positive big tech earnings on Wall Street increased investors’ appetite for riskier assets. Traders awaited U.S. job data later in the day to assess when the Federal Reserve might start easing interest rates.
The nonfarm payrolls report, a closely-watched economic indicator, follows the recent Fed policy meeting where rates were kept steady, and Chair Jerome Powell resisted market expectations of rate cuts in March.
The risk-on sentiment supported the Australian dollar, which gained 0.33% to $0.6594. The New Zealand dollar also rose by 0.11% to $0.6151. The dollar index, measuring the greenback against a basket of currencies, dipped 0.06% to 102.99, extending a 0.5% fall from the previous session. It was on track for its first weekly decline of the year.
Market pricing indicated a 37.5% chance of a Fed cut in March, compared to over 70% a month ago, according to the CME FedWatch tool. A cut in May is almost fully priced in.
Analysts expected three rate cuts in 2024, with the first mid-year, according to Raf Choudhury, Investment Director of Multi-Asset at abrdn. Treasury yields declined, with the two-year yield at 4.2124%, reflecting near-term interest rate expectations.
The yen was little changed at 146.36 per dollar, poised for a weekly gain of more than 1%. A summary of opinions from the Bank of Japan’s January meeting indicated discussions about a near-term exit from negative interest rates.
Sterling rose 0.07% to $1.2752 after the Bank of England kept interest rates steady but hinted at the possibility of future cuts. The euro edged 0.08% higher to $1.0880, eyeing a weekly gain of nearly 0.3%.
