Dollar falls as traders focus on rate hike prospects elsewhere
- Powell’s comments last week add pressure on the dollar
- Commodity-linked currencies rise further
- Busy week with the BoJ, ECB meeting
- Chart: Global exchange rates
LONDON, Oct. 25 (Reuters) – The dollar fell back to a month-long low on Monday as traders continued to focus on the prospect of rising interest rates and tightening outside the United States .
Currency markets were broadly calm at the start of the week as traders awaited US growth data and central bank meetings in the eurozone, Japan and Canada.
The decline in the greenback pulled the dollar index to a one-month low in Asian hours and prolongs the softness after Federal Reserve Chairman Jerome Powell said on Friday he was not there is still time to start raising interest rates. As of 07:30 GMT, the index had recovered some of its losses and last fell 0.1% to 93.542.
Among the beneficiaries were commodity-linked currencies such as the Australian, Canadian and New Zealand dollars, which also benefit from the continued rally in commodity prices.
The euro was little changed at $ 1.1647 as the yen weakened, with the dollar advancing 0.2% to 113.66 yen.
“Support for the US dollar by rising US yields has been tempered so far this month by both improving risk sentiment among global investors and a similar rise in yields outside the US on average in other G10 economies, ”said Lee Hardman, an analyst at MUFG.
“As a result, the yield spreads have not moved decisively in favor of the US dollar. The case for a stronger US dollar is more compelling against the low yielding G10 currencies of the EUR, the CHF and the JPY, where market participants are more comfortable than their national central. Banks will keep their rates low despite higher inflation, “he added.
Powell’s remarks came as investors took into account the Fed’s rate hikes starting in the second half of next year and started cutting long dollar positions in anticipation of other central banks. could act even earlier.
Australian inflation data is due on Wednesday coming week, which should set the tone for the next stage of a standoff between traders and a decidedly conciliatory central bank.
Soaring housing costs and rising food and fuel prices eased as part of Canada’s central bank meeting on Wednesday. On Monday, the Canadian dollar rose 0.2% to C $ 1.2344 per dollar.
Thursday’s US gross domestic product figures – if they show an expected slowdown – could take some pressure from the Fed even if inflation is relatively high.
Neither the Bank of Japan nor the European Central Bank are expected to adjust their policy at their Thursday meeting, but in Europe, market indicators of projected inflation are increasingly at odds with the bank’s forecast. Read more
“President (Christine) Lagarde looks likely to fend off market turmoil over an early rate hike,” said Sean Callow, Westpac strategist.
Elsewhere, the Chinese yuan hit a five-month high at 6.3782 per dollar, while the Turkish lira fell to a new high following a surprise rate cut last week. Read more
Additional reporting by Tom Westbrook in Singapore Editing by Peter Graff
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