Dollar pauses after rally to one-year high; Aussie, kiwi rebound

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TOKYO (Businesshala) – The US dollar touched its lowest point this week against major peers on Thursday, relieved of a rally that has propelled it to a one-year high driven by hopes of a sharp hike in Federal Reserve interest rates. delivered.

FILE PHOTO: US one dollar banknotes are seen in front of the displayed stock graph in this example taken on February 8, 2021. Businesshala/Dado Ruvik/Illustration

The Australian and New Zealand dollars hit multi-week highs, while cryptocurrency bitcoin hit a five-month peak.

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The dollar index, which measures the greenback against six rivals, was flat at 94.048 after falling 0.53% on Wednesday, its highest since Aug. 23.

After gaining nearly 3% since the beginning of last month, the index touched 94.563 on Tuesday, its highest level since the end of September 2020.

The dollar was still back minutes after a September meeting of the Federal Open Market Committee confirmed that a lack of stimulus is certain to begin this year, and a growing number of policymakers worry that high inflation. may remain.

A report from the Labor Department shows US consumer prices rose solid in September, and are likely to rise further amid a rise in energy prices, potentially at the Fed as soon as possible to normalize policy. There is pressure to work.

Most Fed officials, including Chair Jerome Powell, have argued so far that price pressure will be momentary.

The US 5-year, 5-year forward break-even inflation rate, one of the more closely followed gauges of long-term inflation expectations, rose 2.59% overnight to its highest level in seven years.

Money markets are pricing at around 50/50 odds of the first 25 basis point rate hike as of July.

“The USD response may be an example of ‘buy rumour, sell fact’,” Joseph Caperso, a strategist at the Commonwealth Bank of Australia, wrote in a client note.

“We believe that the FOMC’s assumption of a temporary spike in inflation is incorrect. In our view a more aggressive tightening cycle will support the USD.”

The dollar rose 0.26% to 113.55 yen, but still took an overnight hit from a three-year peak of 113.80 yen.

The euro was mostly flat since Wednesday at $1.15935, but had previously touched $1.1601 for the first time since October 5.

Sterling rose 0.55% on Wednesday to $1.3666 and hit its highest level this month.

Westpac expects the dollar to take “one more leg down” in the coming months.

“Relative to the boom seen in Europe, softer growth for the US economy and, to a lesser extent, the UK, will weigh on the US dollar,” bank strategists wrote in a research report.

The substantial US fiscal stimulus has already been priced in dollars but is not certain to pass through Congress, he said, adding that the dollar index is forecast to fall to 91.50 by March, with the euro rising to $1.20. , while the subsequent sterling gain has risen to $1.41. half of next year.

Meanwhile, the Australian dollar was up 0.09% at $0.7387, having previously touched $0.7396, its highest level since September 10.

The New Zealand kiwi dollar rose 0.16% to $0.6977, having previously reached $0.6982 for the first time since September 28.

Bitcoin surged higher to touch a five-month high at $58,550.

Reporting by Kevin Buckland; Editing by Muralikumar Anantharaman and Gerry Doyle

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