By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The U.S. dollar rose on Wednesday on month-end buying and technical factors following recent declines that pushed the greenback to its weakest level in more than a year, as traders waited for data that would could dictate the pace of the Federal Reserve’s upcoming rate cuts. easing cycle.
Sharp (OTC:) bouts of volatility hit currency markets this month, as concerns about a possible US recession and aggressive signals from the Bank of Japan undermined the dollar and lifted other major currencies.
Traders were also awaiting earnings from artificial intelligence (AI) chip giant Nvidia (NASDAQ:), which has caused a stir on Wall Street and beyond in recent years. The dollar has also been sensitive to stock market movements this year.
“As a series of potentially treacherous event risks loom, including tonight’s Nvidia earnings release and next Friday’s hugely important nonfarm payrolls report, traders are cutting their risks and buying the dollar against high-beta currencies,” says Karl Schamotta, head of the market. strategist, at Corpay in Toronto.
The , which measures the U.S. unit against a basket of six major currencies, rose 0.5% to 101.11, on pace for the biggest daily percentage gain since mid-June.
However, for the month of August, the dollar is down 2.8%, its worst monthly decline since November 2023. It hit a 13-month low of 100.51 during the previous session, pressured by a recent sharp reevaluation of the expectations for the Fed. interest rate cuts.
“The dollar’s rise today is justified given the decline this month. We have seen a sharp depreciation of the dollar, which fell by 5% in the second half of 2024,” said Boris Kovacevic, global macro strategist at Convera in Vienna, Austria.
“Looking at flows, I would attribute today’s dollar bid to the usual month-end flows, especially given the dollar’s decline this month.”
Investors also expect the Fed to start cutting rates next month, following Chairman Jerome Powell’s easing last week, with the debate now focusing on whether or not the Fed will deliver a super-sized 50 basis point rate cut , or the standard easing of 25 basis points. .
According to LSEG calculations, current prices indicated a 37% chance of a deeper discount, unchanged from late Tuesday. Markets had also priced in an easing of around 105 basis points by year-end.
DATA AHEAD
A preliminary estimate for second-quarter U.S. gross domestic product will be released later this week, along with the core personal consumption expenditures (PCE) index, the Fed’s preferred inflation measure. Both could likely push the dollar lower if the data turns out weaker than expected.
But given that markets have been expecting rate cuts for weeks from September, downward momentum for the dollar could ease, with support building around the 100.18/30 of the dollar index, said Matt Simpson, senior market analyst at City Index.
“More broadly, valuations across a range of asset classes appear exaggerated. If investors get cold feet in the coming weeks, the dollar’s global dominance… could come in handy again,” Corpay’s Schamotta said.
Against the yen, the dollar rose 0.5% to 144,685 yen, moving away from Monday’s three-week low.
The euro fell 0.6% to $1.1116, still within range of the 13-month peak hit earlier this week.
Investors are awaiting the release of eurozone inflation data for August later this week, which could provide clues about the European Central Bank’s monetary policy path.
Sterling fell 0.6% to $1.3186 after hitting its highest since March 2022 on Tuesday, as traders bet the Bank of England will move more slowly in easing monetary policy than the Fed.
The Australian dollar rose to a nearly eight-month high against the US currency after data showed domestic inflation fell to a four-month low in July, although overall progress in tempering price gains disappointed . The latter fell 0.2% to US$0.6780.
In cryptocurrencies, bitcoin fell 4.1% to $59,302, part of a broader decline in digital currency prices, after the initial boost from Powell’s strong signal on rate cuts faded.
Currency
bid
prices at
28
August
07:20
pm GMT
Description RIC Last US Pct YTD Pct High Low
at Close Change bid
Last
Session
Dollar 101.08 100.6 0.49% -0.29% 101.17 100.
index 59
Euro/pop 1.1117 1.1184 -0.61% 0.71% $1.1184 $1.1
am 105
Dollar/Year 144.69 144.01 0.47% 2.58% 145.035 143.
No. 785
Euro/yen 1.1117 161 -0.09% 3.35% 161.37 160.
46
Dollar/SW 0.8421 0.8416 0.08% 0.08% 0.8452 0.84
iss 12
Sterling/ 1.3185 1.3261 -0.56% 3.62% $1.3261 $1.1
Dollars 105
Dollar/Approx 1.3473 1.3444 0.23% 1.65% 1.3488 1.34
nadian 41
Australia/Thurs 0.6779 0.6793 -0.19% -0.56% $0.6813 $0.6
lar 765
Euro/Swiss 0.9362 0.9412 -0.53% 0.82% 0.9419 0.93
s 53
Euro/Star 0.8428 0.8434 -0.07% -2.77% 0.8439 0.84
ling 11
New Zealand 0.6242 0.6253 -0.15% -1.2% $0.6254 0.62
Dollar/Do 24
llar
Dollar/no 10.5016 10.4588 0.41% 3.62% 10.5451 10.4
road 511
Euro/Norwegian 11.6753 11.7041 -0.25% 4.02% 11.7416 11.6
yes 61
Dollar/SW 10.1985 10.1492 0.49% 1.31% 10.22 10.1
Eden 448
Euro/Sweden 11.337 11.3517 -0.13% 1.91% 11.3656 11.3
en 196
