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U.S. dollar falters as Fed outlook weighs; focus on next week’s inflation data



U.S. dollar falters as Fed outlook weighs; focus on next week's inflation data
© Reuters. FILE PHOTO: U.S. Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The U.S. dollar fell across the board on Thursday, moving in line with lower Treasury yields, as investors stuck to their views that the Federal Reserve does not need to raise interest rates any more than it should as inflation is starting to get under control.

The Swedish crown, on the other hand, soared after the country’s central bank raised rates, forecast further hikes and said it wanted a stronger currency, adding to the dollar’s woes.

A higher-than expected U.S. jobless claims number further compounded the dollar’s losses, as the report suggested labor market weakness that can help bring down inflation.

Initial claims for state unemployment benefits rose 13,000 to a seasonally adjusted 196,000 for the week ended Feb. 4, data showed. Economists polled by Reuters had forecast 190,000 claims for the latest week.

“Fed Chair Powell had the opportunity to turn the screw tighter this week when he had that interview. He didn’t,” said Amo Sahota, executive director, FX consulting firm Klarity FX in San Francisco.

“That’s telling in and of itself. He decided to stick to his narrative and not alarm the marketplace, and cited disinflation. So the market is taking that face value.”

Powell had said on Tuesday and last week that disinflation, or a deceleration in the rise of overall prices, has started.

Richmond Fed President Thomas Barkin on Thursday added to the Fed rhetoric on the slowing economy. He said tight monetary policy is “unequivocally” slowing the U.S. economy, allowing the Federal Reserve to move “more deliberately” with any further interest rate increases.

In afternoon trading, the fell 0.2% to 103.24.

The euro, the biggest component in the dollar index, climbed 0.2% as well to $1.0733, while sterling rose 0.3% against the greenback to $1.2114, with both boosted by improving risk sentiment across markets.

“Investors are still hesitant to go back into dollar shorts before the CPI (consumer price index) report next week. There’s a lot of focus on CPI to see whether Powell’s disinflation story holds,” said Vassili Serebriakov, FX strategist at UBS in New York.

The dollar was down 2% against the Swedish crown at 10.35 while the euro dropped 2% as well to 11.11, set for its biggest daily percentage fall since 2009, after the Riksbank raised its benchmark interest rate by 50 basis points to 3%, and forecast more increases in the spring.

The central bank also said a stronger currency would be desirable to bring down inflation.

Elsewhere, the Australian dollar, often seen as a proxy for risk sentiment, rose 0.8% to US$0.6973 as the safe-haven U.S. currency dipped in line with a rally in equities and other so-called “risk-friendly” assets, helped by strong company earnings.

The dollar rose 0.1% against the Japanese yen to 131.575 yen.

Japan’s government is planning to present the new Bank of Japan governor nominee to parliament on Feb. 14, broadcaster TBS reported on Thursday. Markets are closely watching the appointment, as the new governor’s agenda will be scrutinized as to how quickly the central bank could phase out its massive stimulus.


Currency bid prices at 3:48PM (2048 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change


Dollar index 103.2500 103.4500 -0.17% -0.232% +103.5600 +102.6300

Euro/Dollar $1.0733 $1.0714 +0.19% +0.17% +$1.0791 +$1.0707

Dollar/Yen 131.6200 131.4550 +0.12% +0.38% +131.8200 +130.3400

Euro/Yen 141.26 140.79 +0.33% +0.68% +141.3200 +140.6300

Dollar/Swiss 0.9227 0.9209 +0.18% -0.22% +0.9228 +0.9160

Sterling/Dollar $1.2114 $1.2074 +0.34% +0.17% +$1.2194 +$1.2064

Dollar/Canadian 1.3461 1.3447 +0.10% -0.66% +1.3463 +1.3373

Aussie/Dollar $0.6930 $0.6924 +0.10% +1.68% +$0.7011 +$0.6922

Euro/Swiss 0.9903 0.9866 +0.38% +0.08% +0.9906 +0.9862

Euro/Sterling 0.8859 0.8874 -0.17% +0.15% +0.8886 +0.8840

NZ $0.6320 $0.6307 +0.22% -0.45% +$0.6389 +$0.6304


Dollar/Norway 10.1760 10.3115 -1.38% +3.62% +10.3165 +10.0990

Euro/Norway 10.9241 11.0674 -1.29% +4.10% +11.0712 +10.8849

Dollar/Sweden 10.3579 10.5869 -1.98% -0.48% +10.6155 +10.2958

Euro/Sweden 11.1179 11.3430 -1.98% -0.28% +11.3510 +11.0870

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Dollar stabilizes near five-week high ahead of more debt ceiling talks




Dollar stabilizes near five-week high  ahead of more debt ceiling talks
© Reuters. – The U.S. dollar stabilized in early European trade Tuesday, just off a five-week high helped by its safe haven status as the standoff in Washington over the U.S. debt ceiling continued.

At 03:15 ET (07:15 GMT), the , which tracks the greenback against a basket of six other currencies, traded largely flat at 102.250.

The potential for a U.S. default of its debts if a deal is not done to lift the country’s borrowing limit, which Treasury Secretary Janet Yellen reiterated could be hit as soon as June 1, has helped the dollar push higher of late, with traders seeking the greenback given it is often used as a safe haven in times of stress. 

The main parties are expected to meet once more later Tuesday, with President Joe Biden expressing confidence a deal can be done, but Republican House of Representatives Speaker Kevin McCarthy said on Monday that the two sides were still far apart.

“Unless we see truly encouraging progress, investors’ fears may keep growing,” said analysts at ING, in a note. “Barring positive news on this end, we think the balance of risks remains tilted to the upside for the dollar for now, which should see safe-haven flows as risk sentiment stays subdued.”

Aside from this, traders are likely to focus on the release of U.S. data for April, which is expected to show sales grew 0.8% on the month in April, an improvement from the dramatic slump of 0.6% last month.

The raised interest rates last week for a 10th straight time, but hinted that it may be about to pause its aggressive policy tightening as it studies incoming economic data and assesses the impact of the tightening to date.

Inflation remained elevated in April, even if slightly lower than the prior month, and a number of Fed officials have said in separate addresses that interest rates were likely to stay higher for longer if prices continue to remain substantially above the Fed’s 2% target.

Elsewhere, rose 0.1% to 1.0880, after bouncing off a five-week low overnight, ahead of the release of preliminary first quarter for the euro zone.

This is expected to show the region barely scraped growth in the first three months of the year, rising 0.1% on the quarter and 1.3% on an annual basis.

Also of interest will be the for May, which is expected to show a deterioration of sentiment in the eurozone’s largest economy.

fell 0.3% to 1.2494 after the U.K. unexpectedly rose to 3.9% in the three months to March, raising the likelihood of the Bank of England pausing its run of increases when it next meets in June.

dropped 0.3% to 135.78, fell 0.3% to 0.6683, while rose 0.2% to 6.9643 with the yuan trading near a two-month low after Chinese data showed and grew less than expected in April. 

rose 0.1% to 19.6861 as Turkey’s presidential race heads to a runoff with incumbent Tayyip Erdogan leading his opposition rival.

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Asia FX dips on weak Chinese data, hawkish Fed comments




Asia FX dips on weak Chinese data, hawkish Fed comments
© Reuters. — Most Asian currencies retreated on Tuesday as disappointing Chinese economic data posited a weak outlook for the region’s largest economy, while hawkish comments from Federal Reserve officials also brewed uncertainty over the path of U.S. interest rates.

fell 0.1% and traded near a two-month low after data showed and grew less than expected in April. The readings, which come on the heels of several weak economic indicators earlier this month, point to a staggered recovery in Asia’s largest economy, even after the country relaxed most anti-COVID measures earlier this year.

The weak data also saw markets positioning for a potential 25 basis point rate cut by the People’s Bank next month, which is likely to fuel further weakness in the yuan. The currency was trading just shy of the psychologically important 7 level against the dollar.

Weakness in China spilled over into other Asian currency markets, particularly those with a high trade exposure to the country. The fell 0.1%, while the led losses across Southeast Asia with a 0.3% dip, as traders also locked in recent profits in the currency.

The fell 0.1%, also coming under pressure from a sharp drop in in the face of rising interest rates and worsening economic conditions.

Sentiment towards risk-driven assets was also rattled by a slew of Federal Reserve officials warning that the bank could still act further to bring down stubborn inflation. said in separate addresses that interest rates were likely to stay higher for longer, with some officials also raising the possibility of more interest rate hikes.

The and steadied near a one-month high on Tuesday, after logging small losses in the prior session. But the greenback still strengthened against the by about 0.1%.

The dollar moved little this week as markets hunkered down in anticipation of more U.S. economic signals this week, starting with and due later in the day.

Several more Fed speakers are also lined up for the week, most notably on Friday.

show that markets are still positioning for a pause in the Fed’s rate hike cycle in June. But traders are also factoring in a small chance of a 25 basis point hike.

The prospect of U.S. rates remaining higher for longer bodes poorly for Asian currencies, as the gap between risky and low-risk yields narrows.

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