On Tuesday, the US dollar reached its highest level in more than two months against a number of major currencies. This was due to increasing speculation about upcoming rate reductions by the Federal Reserve.
The yen is also moving closer to its critical level of $150 per dollar.
Early Asian trading saw the euro remain stable, but it remained near its low point of August 8 which was reached on Monday.
The European Central Bank is scheduled to meet on Thursday and many expect another rate cut.
The recent US economic indicators show resilience with only a slight slowdown.
The Fed’s rate cut forecasts were reduced by traders after the September inflation figures exceeded expectations.
The Federal Reserve began its cycle of easing with a 50-basis point reduction at its meeting in September.
Market expectations currently suggest that there is a 89% chance of a reduction of 25 basis points in November. A total of 45 basis points are expected for the rest of the year.
Dollar index last measured at 103.18. This is just a little below Monday’s peak of 103.36, its highest level since August 8.
Index has risen 2.5%, and it appears to be about to stop a decline of three months.
The dollar gained after comments made by Fed Governor Christopher Waller, on Monday. Waller urged caution in future rate reductions, and cited the most recent economic data.
Waller said, “My baseline calls for the reduction of the policy rate over the course of the coming year, regardless what happens near-term.”
Waller noted also that hurricanes in recent years and the Boeing strike could affect data on job growth, resulting in a possible reduction of more than 100,000 jobs for October.
Early November is the next scheduled date for the non-farm payrolls report.
Chris Weston is the head of Pepperstone’s research department.
Waller’s comments quantify the type of disruption that we should expect. The market will not be able to price risk as accurately for the FOMC meeting in November if the NFP is so distorted.
Dollar’s recent rise has had a negative impact on the yen. This is especially true after a pivot to the left by Bank of Japan governor Kazuo Ieda, and Shigeru Shiba’s unexpected opposition to rate increases.
This has raised concerns about when the central bank of Japan will tighten its policy.
Early trading saw the dollar at 149.55 yen, after reaching a high of 149.98 yen on Monday. Japan was closed that day for a public holiday.
On August 1, the last time the yen reached 150 was.
The Australian Dollar remained unchanged at $0.67275 while the New Zealand Dollar dropped 0.13% to $0.6099. Last quoted was $1.090825 for the euro.
The offshore yuan showed no movement in China at 7,0935 to the dollar. This is after a Caixin report that China may issue 6 trillion yuan ($850 billion) more in Treasury Bonds over the next 3 years in order to boost its slowing economy.
Tony Sycamore is a market expert at IG. He noted that the market’s sentiment has shifted towards the expectation of new stimulus measures. These could be discussed during the China National People’s Congress Standing Committee meeting, which will take place later in the month.
The post Dollar hits two month high, yen closes to 150/$ amid speculation of rate cuts may be updated as new developments unfold
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