The US dollar held its highest level in seven weeks against a basket of major currencies today, as traders reassess the outlook for US interest rates following last week’s strong jobs data, which have reduced expectations of significant rate cuts from the Federal Reserve.
As a result of the positive jobs report and increased tensions in the Middle East, which negatively impacted risk appetite, the dollar remained strong.
Expectations for monetary easing from the Federal Reserve have seen a significant shift, with markets no longer fully anticipating a rate cut in November.
According to the CME FedWatch tool, there is now an 86% probability of a 25 basis point cut, a decrease from the more than 70 basis points forecast just a week ago. Only 50 basis points of easing are incorporated into prices between now and December.
The dollar index, a measure of the currency against its major rivals, was trading at 102.41, approaching a seven-week high of 102.69 hit on Friday.
Alberto Musalem, president of the Federal Reserve Bank of St. Louis, expressed support for further interest rate cuts on Monday, emphasizing the good health of the economy and the need for the central bank to be cautious with monetary easing. “Further gradual reductions in the policy rate are likely to be appropriate over time,” Musalem said.
The yield on the 10-year U.S. Treasury note remained above 4% during Asian trading hours, surpassing that level on Monday for the first time in two months, as traders lowered their expectations for cuts aggressive rates.
Investors’ attention now turns to the next inflation report, scheduled for Thursday, and the minutes of the Federal Reserve’s September meeting, which will be released on Wednesday. In addition, the reopening of Chinese markets after a week of vacation is expected.
In foreign exchange markets, the euro was trading at $1.098175, near its lowest level in seven weeks, and the pound sterling was at $1.3095, near its lowest level in three weeks. . The yen showed slight strength at 147.795 per dollar after hitting a seven-week low of 149.10 on Monday, as market participants considered the Bank of Japan’s potential interest rate path.
Recent statements by Japan’s new Prime Minister Shigeru Ishiba that the economy is not ready for further rate hikes have led to a decline in the value of the yen and raised questions about the Bank of Japan’s approach to rate increases.
Other currencies saw minor movements, with the Australian dollar slightly stronger at $0.6768. The New Zealand dollar rose 0.3% to $0.6144 ahead of the Reserve Bank of New Zealand’s monetary policy decision on Wednesday, where economists expect a 50 basis point rate cut.
Reuters contributed to this article.
This article was generated and translated with the help of AI and reviewed by an editor. For more information, see our T&Cs.
