The dollar closed near a three-week low versus key peers on Wednesday as more signs of economic weakness in the United States fueled speculation about a less hawkish Federal Reserve.
Sterling neared a six-week peak on Tuesday after new British Prime Minister Rishi Sunak pledged to lift the country out of the economic crisis.
The euro also held near a six-week high, trading less than half a percent above par with the greenback. The European Central Bank set policy on Thursday and is widely expected to raise rates by 75 basis points.
The dollar index – which measures the currency against six peers including the sterling, euro and yen – was little changed at 111.01, near the previous session’s trough of 110.75, the lowest level since October 5.
Overnight data showed US home prices fell in August as a rise in mortgage rates dampened demand, amid recent signs that Fed rate hikes were already slowing the world’s largest economy. working for.
Traders and economists are forecasting a further 75 basis point increase next Wednesday, but the view is slowing to a half-point in December.
“I’m still in two minds as to whether we can say we’ve seen a peak in the US dollar,” said Ray Attrill, head of FX strategy at National Australia Bank, but “bearish evidence is forming.”
“If the market gets really comfortable with the Fed pivoting – if it is going down 50 basis points, and potentially ending a tight cycle south of 5% early next year – then it It will be time to take a call on the strength of the US dollar, but I want to get through Fed messaging next week before coming to that conclusion.”
The US long-term Treasury yield continued its descent from last week’s multi-year high of 4.338%, having slipped to 4.0833% in Tokyo.
This put special pressure on the dollar versus the yen due to the sensitivity of US rates, the pair held steady at 147.99 after a 0.7% decline since Tuesday.
The dollar hit a 32-year high of 151.94 yen on Friday, but retreated to 144.55 amid two bouts of questionable Bank of Japan intervention on either side of the weekend.
Nevertheless, fundamentals still favor a weaker yen, as the BOJ is expected to keep stimulus settings unchanged on Friday, running counter to monetary tightening by developed-market peers.
Sterling was down 0.21% at $1.1448, but was still close to Tuesday’s high of $1.1500, last seen on September 15.
The euro fell 0.14% to $0.99545, hitting its highest level since October 5 at $0.9995 on Tuesday.
The Australian dollar was 0.13% lower at 0.6386, despite hitting a high of $0.6412 after quarterly consumer inflation data topped economists’ estimates, putting some pressure on the Reserve Bank ahead of a policy meeting on Tuesday.
The Aussie rose to the highest level since 7 October at $0.6412 in the previous session.
“Australian weak attempts to rally on the above-expected core CPI is not a promising sign for its near-term prospects,” said Sean Callow, a senior FX strategist at Westpac.
“A further decline in the US Dollar appears to be the best chance for the Australian Dollar to sustain the push above $0.64. Otherwise, it is back to trade on either side of $0.63.”
The cryptocurrency also strengthened after sharp rallies on Tuesday amid weakness in the dollar. Bitcoin gained 0.14% to $20,116 after an overnight jump of 3.9%. Ether was up 0.45% at $1,466.30 on Tuesday’s 8.7% jump.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)