The dollar steadied on Wednesday, giving the yen and other major currencies some breathing space after a sharp rise that hit a seven-week high last week as investors pause to assess outlook for interest rate developments for the United States.
The New Zealand dollar fell to its lowest level since August 19 at $0.6096, after the Reserve Bank of New Zealand (RBNZ) cut interest rates by 50 basis points.
The kiwi was down 0.55% at $0.61035.
The majority of economists polled by Reuters last week had predicted a significant drop of half a percentage point. The central bank launched an easing cycle in August, seeking to reduce interest rates from their highest level in 15 years.
The timing of U.S. data this week is relatively light, providing some respite after a strong jobs report Friday sent the dollar surging and markets reassessed the expected size of upcoming interest rate cuts.
On Wednesday, investors will read the minutes of the Fed’s September meeting, which included discussions about what appeared at the time to be a deterioration in the jobs market and which ended with the agreement of all decision-makers, except one, on a reduction of 50 basis points.
However, bets on another massive cut in November were taken off the table after the latest non-farm payrolls data pointed to a more resilient situation.
Markets now have an 85% chance of getting a quarter-basis point cut, as well as a slim chance that the Federal Reserve will leave rates unchanged, according to the CME’s FedWatch tool.
The September Consumer Price Index report on Thursday will be the main data of the week.
“US inflation data this week and upcoming corporate earnings will be key to supporting the US dollar rebound and should reinforce the narrative of US exceptionalism,” analysts at Westpac IQ wrote in a note.
The dollar index, which measures the greenback against a basket of currencies, was steady at 102.490, not far from Friday’s seven-week high of 102.69.
Along with the dollar, the euro stabilized around $1.0977, while the pound settled at $1.3101, close to its three-week low of $1.30595 reached on Monday.
The dollar/yen traded in a tight range, last hovering around 148.28 yen, after touching a seven-week high of 149.10 on Monday.
Elsewhere, the Australian dollar is licking its wounds, having fallen to $0.6715 on Tuesday, its lowest since September 16, after minutes of the country’s latest central bank meeting were deemed dovish. It last traded not far from that low, down 0.08% at $0.67415.
Investors remain focused on China after a volatile day on the Chinese and Hong Kong markets in the previous session.
Beijing said on Tuesday it was “fully confident” of hitting its full-year growth target, but stopped short of introducing stronger fiscal measures, disappointing investors who had been banking on greater support policy makers to get the economy back on track.
The offshore yuan stabilized around 7.0695 per dollar.
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