Investing.com – The US dollar edged higher on Wednesday after recovering from recent weakness as some Fed officials were set to speak.
At 04:20 ET (08:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 105,500, moving away from a roughly one-month low of last week.
More statements from the Fed await
The dollar got a small boost late on Tuesday after the Minneapolis Fed chief suggested that persistent inflation and a robust economy could convince the US central bank to keep interest rates unchanged for the rest of this year.
The path of US interest rates continues to dominate the market’s attention, and with no first-rate US economic data this week, policymakers’ views become even more important.
The Fed chairman last week basically ruled out further tightening, but there is a lot of uncertainty about when a move down will occur.
Investors have no shortage of Fed officials to look forward to on Wednesday, with the vice chairman, governor and Boston Fed president all scheduled to speak.
Morgan Stanley now expects the Fed to start cutting rates from September, compared to its previous forecast in July, while continuing to see three 25 basis point rate cuts throughout the year.
“A reversal in key components points to future disinflation, but given the lack of progress in recent months, it will take slightly longer for the FOMC to gain confidence to take the first step,” the bank said in a May 7 note.
Remove ads
.
German economy ‘still struggling’
In Europe, it traded 0.2% lower at 1.0736 after data showed it fell 0.4% month-on-month in March.
“The renewed contraction in industrial production in March, after two months of expansion, reminds us that the German economy is still struggling,” Capital Economics analysts said.
It has signaled a rate cut in June, but much uncertainty remains about what happens next with monetary policy.
was trading 0.3% lower at 1.2473, ahead of Thursday’s meeting of the .
The British central bank is not expected to change interest rates this week. There is speculation that this could send markets towards a cut as early as next month – shortly after the ECB is expected to cut on June 6.
The yen falls despite intervention talks
In Asia, the yen rose 0.4% to 155.35, weakening and returning to a 34-year high of more than 160 hits last week, even as government officials continued to warn of more potential interventions in currency markets.
Bank of Japan Governor Kazuo Ueda said on Wednesday the central bank could take monetary policy measures if the yen’s decline significantly affects prices, while the country’s Finance Minister Shunichi Suzuki reiterated a warning that authorities were prepared respond to excessively volatile movements in the foreign exchange market.
fell 0.4% to 0.6568, continuing sharp declines from the previous session after taking a less aggressive tone than traders expected.
Remove ads
.
While the RBA kept rates steady and warned that inflation will remain stubborn in coming months, it has not threatened to raise rates further – a scenario priced into Australians in the run-up to the meeting.
