Although the conflict in the Middle East still keeps the currency well positioned as a haven of value, operators see slower flexibility in the US.
He global dollar held firm on Tuesday, approaching seven-week highs hit last week, as investors assessed the prospects for further interest rate cuts in USA, with concerns about the conflict between Israel and Iran and the troubled economy of China providing support.
He dollar index —which measures the performance of the greenback in relation to a basket of six other internationally relevant currencies— rose 0.06% to 102.54 units and is at its highest in seven weeks, driven mainly by the escalation of the conflict in Middle East.
Meanwhile, the euro fell 0.03% to $1.0971, near the seven-week low of $1.09515 hit on Friday. The pound sterling rose 0.02% to $1.3085, after hitting a three-week low of $1.30595 on Monday.
He yen had also been the subject of some safe-haven buying due to growing geopolitical concerns, but eased a little later, so dollar/yen closed 0.06% firmer at 148.27. Meanwhile, the chinese yuan fell to 7.0648 per dollar.
Investors study the Fed’s next moves
The US data calendar is relatively light this week. Investors will look for trading signals in the Wednesday release of the minutes of the September meeting of the Federal Reserve, where officials almost unanimously agreed to cut rates by 50 basis points, as well as in Thursday’s September consumer price index report.
“Considering that the market was probably very short dollars on Friday, I think there will be caution and patience before the CPI on Thursday,” he said Vassili Serebriakov, currency strategist at UBS in New York.
Traders changed their expectations for monetary easing from the Fed this year. A strong jobs report last week lent credence to comments by the head of the US central bank, Jerome Powell that the central bank would stick to its usual quarter-point rate cuts after it began its easing cycle with September’s big cut.
The president of the New York Federal Reserve, John Williams, a standing vote on the Rate Setting Committee, echoed Powell’s comments, telling the Financial Times in an interview published Tuesday that he did not consider the September move “as the rule for how we will act in the future.”
Markets attribute an 87% probability of a 25 basis point reduction in November, the tool showed CME FedWatch, and some are now betting there will be no cuts. In December, only 50 basis points of flexibility have been discounted, compared to more than 70 basis points the previous week.
Source: Ambito
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