The U.S. dollar traded in a narrow range on Thursday after hitting a two-week high in the previous session, supported by a rise in U.S. Treasury yields even as market participants bet on a drop in U.S. rates. interest from the US Federal Reserve next week.
The Australian dollar jumped after Australian employment beat forecasts, while the euro remained stable ahead of the European Central Bank’s (ECB) monetary policy decision later today.
The greenback held on to much of its gains from the day before, helped by a rise in U.S. Treasury yields on Wednesday, as the Treasury Department sold long-term stocks and data showed a widening budget deficit American.
The Consumer Price Index (CPI) for November showed an increase of 0.3%, the largest since April, after increasing by 0.2% for four consecutive months.
Markets now see a 98.6% probability that the Fed will cut rates by 25 basis points at its Dec. 17-18 meeting, compared to 78.1% a week ago, the FedWatch tool showed of the CME.
Market participants will get further data on US inflation later today when the Producer Price Index (PPI) is released.
Unless they show “strong increases” in categories that drive personal consumption spending, November CPI data should allow the Fed to move forward with a reduction, Carol said Kong, foreign exchange strategist at the Commonwealth Bank of Australia.
But the Fed’s rate trajectory beyond December is less certain.
“The dollar is expected to remain higher as concerns about halting disinflation support current market pricing for a more gradual pace of FOMC rate cuts next year,” Ms. Kong said.
The Dollar Index, which measures the greenback against six other currencies, fell 0.07% to 106.53, not far from a two-week high of 106.81 hit on Wednesday.
The dollar fell 0.21% to 152.14 yen after hitting 152.845 yen on Wednesday, its highest level since November 27.
-Markets further reduced expectations for a December rate increase from the Bank of Japan after Bloomberg reported that Japan’s central bank saw “little cost” to waiting.
Traders also had their eyes on news from the Central Conference on the Chinese Economy which will be held behind closed doors this week, after a Reuters report that China was considering allowing a weaker currency in the year next year put the yuan on the defensive.
On Monday, the Politburo pledged to adopt a “sufficiently flexible” monetary policy to stimulate economic growth.
The offshore yuan was last at 7.2735 per dollar, up about 0.10%.
The Australian dollar was last up 0.6% at $0.64075, after slipping to $0.63370 on Wednesday for the first time since November 2023.
The kiwi gained 0.29% to sit at $0.58010 after hitting its lowest level since November 2022 on Wednesday at $0.57625.
The euro traded at $1.0506, up 0.09% ahead of the ECB’s monetary policy meeting later today, where it is widely expected to make a reduction of a quarter of a basis point. The focus will be on any clues regarding the central bank’s outlook for rate developments.
The British pound was up 0.14% at $1.2768.
The Swiss franc traded at 0.88315 per dollar as markets weighed the prospect of a half-point interest rate cut on Thursday from the Swiss National Bank.
The dollar rose to 1.41435 Canadian dollars after the Bank of Canada cut its key rate by 50 basis points to 3.25% on Wednesday to address slowing growth.
