He global dollar remained stable on Wednesday in the midst of a complex international political scenario, marked by political crises in South Korea and France and the expectation at the local level that what will happen with interest rates in the last meeting of the year of the United States Federal Reserve (Fed).
He dollar fell 0.8% to 1,413.6 won, after rising 1.6% overnight as South Korean lawmakers quickly ended martial law declared by the country’s president, Yoon Suk-yeol, who now faces the decision of resigning or facing impeachment.
But politics remained the focus and South Korean lawmakers on Wednesday introduced a bill to remove President Yoon from office.
“In the short term, you have to think that it will be difficult for the won to perform particularly well: (There is a) terrible structural context, the domestic economy seems weak, the central bank is likely to intervene and do more (easing) than that was previously expected, and on top of that, political unrest,” he told Reuters Rob Carnell, regional research director ING for Asia-Pacific. “The fact that the dollar generally seems stronger than everything else by default (makes it) almost a perfect storm,” he added.
The dollar also rose against the yen, rising 0.6% to 150.52, after media reports raised doubts about market expectations that the Bank of Japan would raise interest rates this month, which which drove down government bond yields.
Instability in France
He euro rose slightly against the dollar, to $1.0512, after far-right and left-wing lawmakers joined forces to back a no-confidence motion against the prime minister Michael Barnier and his government, with a majority of 331 votes. Barnier is expected to present his resignation and that of his government to the president Emmanuel Macron shortly.
“At this point, the real question is how much worse the situation will get from here,” he said. Eugene Epstein director of trading and structured products for North America at Moneycorp in New Jersey.
“We don’t have any kind of clarity about what the outcome of the votes will be and how long the budget will essentially be used as a lever to resolve the political interests of all parties.”
Pay attention to the Fed’s next moves
In U.S. developments, the greenback received some support on Tuesday after data showed U.S. job openings rose moderately in October while layoffs declined, even as U.S. officials Federal Reserve That day they did not provide definitive guidance on what they intend to do as they conclude their next monetary policy meeting in two weeks.
Traders are awaiting monthly payrolls data on Friday for more clues on the outlook for rates, while a private payrolls report due later on Wednesday will offer a preview of sorts. Market implied odds of a quarter-point rate cut on Dec. 18 stood at 75%, according to the tool FedWatch of CME.
Source: Ambito
