By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The dollar fell in thin, choppy trading on Tuesday after Fed Chairman Jerome Powell struck a dovish tone in his remarks, suggesting the U.S. central bank is likely to begin its easing cycle later this year.
Powell said at a monetary policy conference in Portugal that the U.S. economy has made significant progress on inflation as it is back on the disinflationary path. His comments were seen as forgiving, analysts said.
The comments from the Fed’s top official outweighed data showing that U.S. job openings rose in May after outsized declines in the previous two months. The number of job openings, a measure of labor demand, rose by 221,000 to 8.140 million on the last day of May, according to the Job Openings and Labor Turnover Survey, or JOLTS report.
Economists polled by Reuters had forecast 7.910 million job openings in May. April data has been revised downwards to show 7.919 million unfilled positions instead of the previously reported 8.059 million.
“Powell didn’t really say anything new, but I would say he was somewhat forgiving,” said Erik Bregar, director of FX & precious metals risk management at Silver Gold Bull in Toronto, adding that his comments helped push the dollar a bit lower. .
“But I would say that the JOLTS report is not as strong as it looks at first glance. The April figure has been revised downwards and that is why the market is trying to shake off the JOLTS report. That’s why the dollar isn’t as high as it was. initially after release.”
Following the JOLTS report and Powell’s comments, US interest rate futures have priced in a 69% chance of a rate cut in September, up from around 63% on Monday, according to LSEG calculations. The market has also priced in one to two rate cuts in 2024.
In afternoon trading, the , which measures the U.S. unit against six other currencies, fell 0.1% to 105.71.
BOOSTING TREASURY YIELDS
The dollar has been generally supported recently by the continued rise in government bond yields.
Ten-year Treasury yields rose almost 14 basis points (bps) overnight to 4.479%, with analysts linking the rise to expectations that Donald Trump will win the US presidency, which would in turn lead to higher rates and government loans.
On Tuesday, the yield on the 10-year bond fell, falling 4.3 basis points to 4.435%.
Against the yen, the dollar was flat at 161.48. Earlier on Tuesday, yields reached 161.745, the highest level in almost 38 years, driven mainly by the large interest rate differential between the US and Japan.
Japan’s finance minister said on Tuesday that authorities were alert to sharp moves in the currency market, but gave no clear intervention warning.
“The market simply doesn’t believe it when the Bank of Japan and its monetary officials say they are keeping a close eye on the yen,” said Bregar of Silver Gold Bull.
Against the euro, the yen reached a low of 173.67 on Monday and remained just below that level on Tuesday, while against the Australian dollar the yen was near a 33-year low as carry trade remained attractive.
The euro was flat against the dollar at $1.0741, showing little reaction to comments Tuesday from European Central Bank President Christine Lagarde, who was in the same monetary policy forum with Powell. She said the eurozone is “very advanced” on the path to disinflation, but there are still “question marks” over the prospects for economic growth.
Inflation in the eurozone eased last month, but a crucial component of the services sector remained stubbornly high, fueling concerns that domestic price pressures could remain at elevated levels.
The market is now looking forward to the second round of the French elections this weekend.
In other currencies, sterling rose 0.3% against the dollar to $1.2683, but not far from last week’s low of about two months.
The dollar rose 0.1% to US$0.6668, with traders keeping an eye on the central bank’s minutes, which showed much debate over whether policy was tight enough to ensure the inflation would slow down as desired. [AUD/]
Currency
bid
prices at
July 2nd
07:11
pm GMT
Description RIC Last US Pct YTD Pct High Low
change bid at Close
Last
Session
Dollar 105.7 105.84 -0.12% 4.27% 106.05 105.
index 71
Euro/pop 1.0743 1.0741 0.03% -2.67% $1.0747 $1.0
am 71
Dollar/Year 161.47 161.485 -0.01% 14.49% 161.74 161.
No. 295
Euro/yen 1.0743 173.39 0.05% 11.47% 173.6 173.
09
Dollar/SW 0.904 0.9029 0.13% 7.41% 0.905 0.90
is 28
Sterling/ 1.2683 1.2651 0.27% -0.32% $1.2685 $1.0
Dollars 71
Dollar/Approx 1.3678 1.3736 -0.4% 3.2% 1.3755 1.36
nadian 75
Australia/Thurs 0.6666 0.6661 0.11% -2.21% $0.6671 $0.6
lar 634
Euro/Swiss 0.9711 0.9696 0.15% 4.58% 0.9714 0.96
s 82
Euro/Star 0.8467 0.8488 -0.24% -2.32% 0.8495 0.84
ling 67
New Zealand 0.6078 0.6075 0.07% -3.79% $0.6082 0.60
Dollar/Do 48
llar
Dollar/no 10.6776 10.6492 0.27% 5.35% 10.721 10.6
road 506
Euro/Norwegian 11.4706 11.448 0.2% 2.2% 11.5046 11.4
yes 295
Dollar/ZW 10.5882 10.6077 -0.18% 5.18% 10.6685 10.5
Eden 89
Euro/Sweden 11.3752 11.3949 -0.17% 2.25% 11.4297 11.3
en 75
