The US dollar held near recent lows on Wednesday as investors awaited the Federal Reserve’s September meeting minutes and comments from policymakers for clues on the path of interest rates.
Markets have sharply scaled back expectations of another Fed rate hike this month following softer US inflation and employment data, with the probability of at least a 25-basis-point increase in October falling to 20.5% from around 51% a week ago, according to CME FedWatch.
The dollar index, which measures the greenback against a basket of currencies, rose 0.03% to 101.94 after falling 0.27% in the previous session. The euro eased 0.08% to US$1.1249 while sterling slipped 0.08% to US$1.3262.
The Fed is due to release minutes from its Sept 15-16 meeting later today. Officials Christopher Waller, Neel Kashkari and Alberto Musalem are also scheduled to speak.
“There seems to be a little bit less urgency on the Fed to hike rates after the softer PCE and then the nonfarm payroll reports recently,” said Gavin Friend, senior markets strategist at National Australia Bank, in a podcast.
Markets are now pricing an 84.5% chance of a Fed hike at the December meeting, despite some officials calling for patience. Kansas City Fed President Jeff Schmid said on Tuesday that the central bank still needs to raise rates further to bring inflation down.
“With little forward guidance from Chair (Kevin) Warsh, markets have reacted sharply to each US data release and policymaker speech,” Commonwealth Bank of Australia currency strategist Samara Hammoud said in a report. “We expect the Fed to wait until December before hiking again.”
Elsewhere, the Japanese yen weakened 0.19% against the dollar to 158.43 after Bank of Japan policymaker Ayano Sato said she supported raising interest rates in several stages.
The Australian dollar fell 0.04% to US$0.6979 while the New Zealand dollar slipped 0.07% to US$0.5617.
Bond yields have risen globally in recent weeks on expectations of further central bank rate hikes and concerns over government finances, although easing stress in European bond markets helped lift the euro sharply in the previous session.
Bitcoin fell 0.22% to US$85,438.59 while ether declined 0.12% to US$2,695.22.
Reuters
