By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The dollar fell against a number of major currencies on Tuesday, consolidating Monday’s gains ahead of key inflation data and a highly anticipated U.S. presidential debate, although neither outcome is likely to have an impact have on overall monetary policy.
Safe-haven currencies such as the yen and Swiss franc also rose thanks to a slide in bank stocks, analysts said, after the Federal Reserve regulator on Tuesday outlined a plan to boost major banks’ capital by 9%. That disappointed bank investors and some critics of the rule. The banking index fell 2.7% to 408.2, after earlier falling to a one-month low.
The Federal Reserve is widely expected to cut interest rates next week for the first time in more than four years. What is still up for debate, however, is the size of the interest rate cut. Fed funds futures are pricing in a 67% chance of a 25 basis point (bp) cut at the September 17-18 policy meeting, and a 33% chance the Fed will make a 50 basis point cut, according to calculations of the LSEG.
Odds for a 50bp cut rose as much as 50% last Friday after a mixed US labor report.
“The overall theme is consolidation. If you look at the one-month chart of the stock markets, we are actually in the middle of the range,” said Eugene Epstein, head of structured products, North America at Moneycorp in New York.
“So we are moving higher again from the lows of late August, and the driver of that has been mainly on the yield front. The market had quite high expectations for the Fed rate cut next week… but some of those expectations have been reversed,” he added.
Investors will still be watching the US Consumer Price Index report for August, due out on Wednesday. However, the Fed has indicated that it is focusing less on inflation and more on employment, and remains confident that US inflation is on a downward trajectory.
The headline U.S. CPI is expected to rise 0.2% month-on-month in August, unchanged from the previous month, according to a Reuters poll. However, on an annual basis, interest rates would have risen only 2.6%, compared to 2.9% in July.
In afternoon trading, the dollar fell 0.5% against the yen to 142.35 yen, not far from a one-month low of 141.75 on Friday. The dollar fell 2.7% against the yen last week.
Analysts do not expect the Bank of Japan to raise rates or provide decisive guidance at its meeting next Friday.
Against the Swiss franc, the dollar fell 0.3% to 0.8466 francs.
The drop in oil prices added to the global unrest, sending the yen and Swiss franc higher, analysts said. Global oil benchmark futures fell to their lowest level since December 2021 on Tuesday after OPEC+ cut its demand forecast for this year and 2025, offsetting supply-side concerns from Tropical Storm Francine.
Meanwhile, the euro fell 0.1% to $1.1024.
Investors are keeping an eye on Europe’s political backdrop, citing the stalemate in France and increased uncertainty across the EU following Germany’s regional elections.
However, the spotlight will be on the European Central Bank’s messages after its policy meeting on Thursday. Traders are anticipating an easing by the ECB of 63 basis points this year.
The dollar index, a measure of the greenback’s value against six major currencies, was flat to slightly lower at 101.63. So far this year, the dollar index is up 0.1%.
Investor attention will also turn later on Tuesday to the televised US presidential debate between Republican candidate Donald Trump and his rival, Democratic Vice President Kamala Harris, which could weigh heavily on the November election.
Investors see the dollar rising in the event of a Trump victory, as tariffs could support the currency and higher budget spending could raise interest rates.
The pound, meanwhile, rose after UK data showed robust employment growth. It was last up 0.1% at $1.3081.
In China, the country’s imports lagged behind expectations and grew by only 0.5%. That followed Monday’s lower-than-expected inflation data, which highlighted continued weak domestic demand.
fell slightly against the dollar, which rose 0.1% to 7.1193, with losses limited by better-than-expected export data. [CNY/]
Currency
bid
prices at
10
September
07:13
pm GMT
Description RIC Last US Pct YTD Pct High Low
change bid at Close
Last
Session
Dollar 101.61 101.65 -0.04% 0.24% 101.77 101.
index 54
Euro/pop 1.1026 1.1034 -0.06% -0.1% $1.105 $1.1
am 016
Dollar/Year 142.36 143.19 -0.56% 0.96% 143.675 142.
n 24
Euro/yen 1.1026 157.97 -0.63% 0.86% 158.63 156.
8
Dollar/SW 0.8465 0.8494 -0.31% 0.61% 0.8498 0.84
iss 56
Sterling/ 1.3082 1.3073 0.07% 2.81% $1.3108 $1.3
Dollars 049
Dollar/Approx. 1.3601 1.3559 0.34% 2.63% 1.3615 1.35
nadian 57
Australia/Thurs 0.6658 0.6661 -0.03% -2.34% $0.6677 $0.6
lar 642
Euro/Swiss 0.9332 0.9371 -0.42% 0.5% 0.9377 0.93
s 25
Euro/Star 0.8427 0.8439 -0.14% -2.78% 0.8447 0.84
ling 26
New Zealand 0.6154 0.6145 0.17% -2.6% $0.6164 0.61
Dollar/Do 29
llar
Dollar/No 10.8325 10.8328 0% 6.88% 10.863 10.7
road 698
Euro/Norwegian 11.9445 11.9554 -0.09% 6.42% 11.9976 11.8
yes 795
Dollar/ZW 10.3707 10.3692 0.02% 3.02% 10.4025 10.3
Eden 494
Euro/Sweden 11.4358 11.443 -0.06% 2.79% 11.4756 11.4
en 18
