By Alden Bentley
NEW YORK/LONDON (Reuters) – The U.S. dollar rose on Wednesday ahead of data releases on the Federal Reserve’s decision in September to cut interest rates by 50 basis points, reflecting confidence that the central bank will not be as aggressive will continue to relax.
Concerns about demand from China have been a theme all week, amid disappointment over the follow-up to last month’s stimulus measures. The Australian and New Zealand currencies were particularly hard hit on Wednesday.
While the minutes of the last meeting of the Federal Open Market Committee may show how heated the debate was over the bigger-than-expected cut, they will be somewhat out of date after last Friday’s robust nonfarm payrolls data caused markets to push the Fed short-term interest rates were repriced. lower expectations.
The euro extended its recent sell-off to a two-month low against the dollar, last down 0.26% at $1.0953. The dollar/yen rose 0.61% to match Monday’s high of 149.10, which was the highest since August 16.
The yen has taken a hit since Japan’s new Prime Minister Shigeru Ishiba, a known critic of loose monetary policy, surprised markets with recent comments that the country is not ready for further rate hikes.
Ishiba has scheduled snap elections for Oct. 27, ahead of the Bank of Japan’s monetary policy meeting in October and the U.S. presidential election on Nov. 5.
The , which measures the dollar against a basket of currencies including the yen and euro, extended its rally to its highest level since August 16 and was 0.26% firmer at 102.76.
Traders are also watching a parade of Fed speakers on Wednesday and keeping their powder dry ahead of the release of the September Consumer Price Index on Thursday.
“The big news now, we have the CPI tomorrow. I think China’s announcement that they’re going to make another announcement on Saturday, the Treasury Department, is important,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “Although we don’t see much impact here today in the dollar block.”
Looking at the term structure of Fed Funds futures, traders see about an 88% chance of a 25 basis point cut at the November meeting, and about 50 basis points more by year’s end, according to LSEG calculations.
Lorie Logan, president of the Dallas Federal Reserve Bank, said Wednesday that she supported last month’s outsized rate cut but wants smaller cuts ahead given “still real” upside risks to inflation and “meaningful uncertainties” about the economic prospects.
Later, Chicago Fed President Austan Goolsbee, Richmond Fed President Thomas Barkin, Fed Vice Chairman Philip Jefferson and, after the closest, Boston Fed President Susan Collins and San Francisco Fed President Mary Daly are also scheduled to appear.
China’s Finance Ministry on Wednesday called a press conference for Saturday on fiscal policy, raising expectations about stimulus, a day after a press conference by the state planner – the National Development and Reform Commission – disappointed markets by failing to provide key new stimulus details .
But that did little for the , which fell 0.36% against the US dollar at $0.6721. The yuan weakened to 7.0810 per dollar.
The New Zealand dollar was one of the biggest gainers on Wednesday after the Reserve Bank of New Zealand cut interest rates by 50 basis points.
The price fell 1.14% to $ 0.6069, reaching the lowest level in almost two months
‘We see increasing near-term headwinds (for the New Zealand dollar versus the US dollar), including aggressive repricing for the Fed, potential geopolitical escalation, de-risking ahead of the US elections, depleted momentum on trading, and now a more RBNZ is softer than expected,” said Lenny Jin, global currency strategist at HSBC.
“Potentially strong fiscal stimulus from China is an upside risk, but the (Australian dollar) is likely to benefit more.”
