Oct 19, 2023: The dollar held firm against its peers on Thursday ahead of remarks by Federal Reserve Chair Powell as expectations grew that the U.S. central bank will keep rates higher for longer.
The greenback had the yen still hovering around Wednesday’s two-week low, not far from the psychologically sensitive 150-mark.
The Australian dollar slid after domestic jobs data surprised to the downside, and the New Zealand dollar hit a near one-year low.
The dollar index, which measures the dollar against a basket of currencies, remained mostly flat during Asian trading hours, hanging around the previous day’s high of 106.63.
The euro was steady at $1.0534 after coming under pressure from the greenback overnight, while sterling was edging closer to a two-week low at $1.21235.
The dollar has received support from a surge in U.S. Treasury yields, which continued their rise in the Asian morning as markets wagered that Federal Reserve Chair Jerome Powell would strike a hawkish tone at an appearance later on Thursday.
Recent rhetoric from the Fed, however, suggests policymakers are taking heed of a significant tightening in financial conditions, as well as increased uncertainty given recent geopolitic events in the Middle East, said IG Market Analyst Tony Sycamore.
“I think it highly likely the Fed Chair will reinforce the more cautious commentary heard from Fed speakers over the past week and half,” he said.
Powell will participate in a discussion on the economic outlook at the Economic Club of New York at 1600 GMT.
Fed policymakers have been signaling a pause in hiking interest rates for another couple months as they wrestle with mixed signals, including strong U.S. economic data and signs of progress on still-stubbornly high inflation.
Their next monetary policy meeting will be held on Oct. 31 – Nov. 1.
The Japanese yen strengthened slightly to 149.8 per dollar, off Wednesday’s two-week low of 149.94 but still close to the 150-level that traders perceive as a potential trigger for currency intervention by Japanese authorities.
Earlier in October, the yen rallied sharply after slipping past 150 but later fell back; indications were that Japan did not intervene.
Dollar/yen could be pushed higher depending on whether U.S. yields continue to rise at a faster pace than their Japanese peer yields, Carol Kong, currency strategist and economist at the Commonwealth Bank of Australia (OTC:CMWAY), wrote in a note.
“The implication is the risk of FX intervention by the BoJ remains high in our view,” said Kong.
Japanese 10-year government bond yield rose to a fresh decade high of 0.815% on Wednesday, prompting the Bank of Japan to announce $2 billion in emergency bond-buying to keep downward pressure on yields.
Elsewhere, the Australian dollar took a hit following domestic employment data, tumbling as low as $0.6296 versus the greenback. It last sat at $0.63015.
Australia employment rose less than expected in September, the data showed on Thursday, following a blowout result the month before.
The kiwi was down 0.5% at $0.5825, hitting an 11-month low.
Source Courtesy: Reuters