By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The U.S. dollar fell on Friday, taking a breather after five straight days of gains, as risk appetite increased following yet another round of stimulus from China that supported global equities, led by Chinese shares.
Investors cheered the Chinese government’s launch of two financing programs to boost the stock market. Chinese stocks rose as a result, pushing other stock markets, including the Nasdaq and Nasdaq, higher.
That also increased the value and boosted commodity currencies like the Australian and Canadian dollars at the expense of the safe dollar.
However, the , which measures the value of the US unit against six major currencies, was on track for its third weekly gain, currently up 0.6% this week. So far this month, rates are up about 2.7%, the biggest monthly gain since February 2023.
The index last fell 0.3% to 103.49, the biggest daily drop since late September.
“Today’s dollar pullback was more a result of China. Last night, China launched measures to support the stock market,” said Erik Bregar, director of FX & precious metals risk management at Silver Gold Bull in Toronto.
“That boosted Chinese equities and broader risk sentiment and put pressure on the dollar/yuan, which in turn helped lift the euro/dollar. That was the start of the dollar’s pullback.”
However, Friday’s price action for the U.S. dollar was likely temporary, Bregar said.
The biggest support for the dollar in recent weeks has been a shift in Federal Reserve policy expectations toward a more moderate easing phase, following a slew of generally solid U.S. economic data. The Fed cut rates by as much as 50 basis points (bps) in September, prompting the interest rate futures market at the time to price in another big move this year.
“Speculation that the Fed could follow September’s 50 basis point rate cut with another move of similar magnitude has been blown away by a raft of data pointing to a resilient US economy,” wrote Jane Foley, head of FX strategy at Rabobank in London.
“Instead, rumors have emerged that the FOMC may be willing to cut rates just one more time before the end of the year.”
US interest rate futures priced in a 95% chance that the Fed will cut rates by 25 basis points next month, and a 5% chance that the Fed will pause rates or keep the Fed funds rate at the target range of 4. 75%-5% will love it. LSEG estimates. Previously, they would probably have seen a further 50 basis point cut at one of these meetings.
The futures market also expects a cut of about 45 basis points for 2024, and another 104 basis points cut next year.
RISING TRUMP ODDS
In afternoon trading, the dollar fell 0.5% against the yen to 149.51. However, the price has risen about 0.8% this week, with the Japanese currency rising above the 150 level on Thursday for the first time since early August. The US currency also rose 4.6% in October, the best monthly performance since February last year.
Adding to the dollar’s overall glow was the growing prospect that former President Trump would win the November election, as his proposed tariff and tax policies are believed to keep US interest rates high.
The dollar fell further against the Japanese currency after data showed US housing starts fell 0.5% to 1.354 million in September, after rising 7.8% to 1.361 million in August.
The euro, meanwhile, rose 0.3% against the dollar to $1.0865, up for the first time in eight days and on track for its biggest daily gain since September 26. biggest monthly decline since May 2023.
On Friday, the economy benefited from Chinese stimulus news after the European Central Bank cut eurozone interest rates by a quarter of a percentage point on Thursday, in line with expectations. Traders are now pricing in successive rate cuts at the ECB’s upcoming meetings.
In Asia, the currency rose against the dollar, which fell 0.3% to 7.1177 yuan. The Australian dollar, often used as a liquid proxy for the Chinese currency, rose 0.1% to US$0.6704.
The pound was one of the strongest performers against the dollar, rising 0.2% to $1.3042 after UK data showed retail sales grew more than expected in September, offering investors some reassurance about the strength of the UK economy.
In the cryptocurrency space, bitcoin got a boost from Trump’s rising prospects in the US presidential election, as his administration is seen taking a softer stance on cryptocurrency regulation. The stock last rose 2.8% to $68,781, and is up more than 10% since October 10.
Currency
bid
prices at
18
October
07:33
pm GMT
Description RIC Last US Pct YTD Pct High Low
at Close Change bid
Last
Session
Dollar 103.49 103.78 -0.27% 2.09% 103.78 103.
index 45
Euro/pop 1.0864 1.0831 0.31% -1.57% $1.0868 $1.0
ar 826
Dollar/Year 149.53 150.245 -0.48% 6.01% 150.18 149.
no. 445
Euro/yen 1.0864 162.67 -0.13% 4.39% 162.84 162.
21
Dollar/SW 0.8653 0.866 -0.06% 2.83% 0.8669 0.86
iss 5
Sterling/ 1.3042 1.3011 0.24% 2.49% $1.307 $1.3
Dollar 012
Dollar/Approx 1.3807 1.3795 0.1% 4.17% 1.3815 1.37
nadian 85
Australia/Thurs 0.6702 0.6696 0.1% -1.69% $0.6719 $0.6
lar 695
Euro/Swiss 0.9401 0.938 0.22% 1.24% 0.9406 0.93
s 78
Euro/Star 0.8329 0.8323 0.07% -3.91% 0.8336 0.82
ling 96
New Zealand 0.6066 0.6061 0.12% -3.97% $0.6079 0.60
Dollar/Do 55
llar
Dollar/no 10.9248 10.912 0.12% 7.79% 10.9394 10.8
road 594
Euro/Norwegian 11.8702 11.8234 0.4% 5.76% 11.881 11.7
yes 714
Dollar/ZW 10.5255 10.5372 -0.11% 4.55% 10.5493 10.5
Eden 03
Euro/Sweden 11.4361 11.4144 0.19% 2.79% 11.4435 11.3
en 86
