Precise Investors


Dollar drifts on US rates outlook


The dollar index eased 0.058 per cent to 103.71, staying near the two-and-a-half month low of 103.17 it hit earlier this week

The dollar was restricted on Friday by uncertainty over the course of U.S. interest rates, while the yen firmed after Japan’s core consumer price growth increased, reinforcing views that the Bank of Japan may soon roll back monetary stimulus.

With U.S. markets closed on Thursday for the Thanksgiving holiday and due for a shorter trading session on Friday, currencies are likely to trade narrowly but possibly with some volatility as liquidity is expected to remain thin.

The dollar index, which measures the U.S. currency against six rivals, eased 0.058 per cent to 103.71, staying near the two-and-a-half month low of 103.17 it hit earlier this week.

The index is 2.8 per cent lower for the month, on course for its weakest monthly performance in a year on growing expectations that the Fed is done hiking interest rates and could begin cutting rates next year.

Markets have dialled back expectations of Fed rate cuts in 2024, with futures now showing a 26 per cent possibility that the Fed cuts its target rate at the March 2024 policy meeting, as per CME Group’s FedWatch tool. That compares with a 33 per cent chance last week.

Meanwhile, Japan’s core consumer price growth rose marginally in October, after easing the prior month, reinforcing investors’ views that stubborn inflation may push the Bank of Japan to roll back monetary stimulus before long.

ING economists said they expect the central bank to move away from its super-accommodative stance next year.

We believe that the BOJ may scrap the yield curve programme as early as the first quarter of next, as Japanese government bonds seem to have steadied, then begin its first rate hike in the second quarter of 2024 if wage growth continues to increase next year.

The euro stood at $1.09065, having increased 0.16 per cent overnight after a series of preliminary surveys showed recession in Germany may be shallower than anticipated, which offset a downbeat reading on French business activity.

Sterling was at $1.254, 0.06 per cent higher on the day.

The Australian dollar added 0.11 per cent to $0.656, while the kiwi gained 0.15 per cent to $0.606.

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