Written by Kevin Buckland
TOKYO (Reuters) – The U.S. dollar rose to a 10-week high against the yen on Thursday as markets grew more confident about the Federal Reserve’s patient approach to further monetary easing, even as a key inflation report was due later. today.
The index, which measures the currency against six major rivals including the yen, held near its highest level in nearly two months reached overnight, as traders cut bets on US interest rate cuts this year after unexpectedly strong jobs data last week. .
The euro fell near its lowest levels since August 13 against the dollar.
Economists polled by Reuters said the September CPI, due at 1230 GMT, is likely to show core inflation in the United States holding steady at 3.2% year-on-year.
Kyle Rodda, senior financial markets analyst at Capital.com, said the “US exceptional trade” has resurfaced on the back of the recent wave of strong jobs data.
Minutes from the Federal Reserve’s latest meeting, released overnight, underscored the central bank’s focus on maintaining a healthy labor market.
“The US dollar is regaining its dominance… primarily due to the continued superior US economic performance,” Ruda said.
At the same time, an upward surprise in the US CPI may force the Fed to doubt its confidence about the path of inflation.
San Francisco Federal Reserve Bank President Mary Daly said late Wednesday that she was now less concerned about a return of inflation than about hurting the labor market.
CME Group’s (NASDAQ:) FedWatch tool showed that traders are placing 85% odds on the Fed to cut interest rates by 25 basis points in its next policy decision on November 7, and a 15% chance of no change.
A week ago, the probability of a quarter-point cut was 65%, with a 35% chance of a half-point cut.
The dollar index was little changed at 102.89 by 0500 GMT, slightly below the highest level recorded on Wednesday at 102.93, the level last seen on August 16.
The US currency rose to 149.40 yen, and earlier touched 149.54 yen for the first time since August 2.
The euro settled at $1.0940 after falling to $1.0936 in the previous session.
“There is a limit to how much further pricing in rate cuts can be removed without strong guidance from senior FOMC officials,” said Joseph Capurso, head of international and sustainable economics at the Commonwealth Bank of Australia, who expects cuts of 50 points. basis during the remaining two Fed meetings this year.
The Australian dollar, which is highly susceptible to risks, gained 0.32 percent to 0.6740 US dollars, supported by the rise of stocks in China, the largest trading partner, with the central bank of the East Asian country launching a swap program aimed at supporting the stock market.
The Chinese Ministry of Finance is scheduled to hold an upcoming press conference on fiscal policy on Saturday.
The dollar fell to its lowest level since September 16 at US$0.6708 on Wednesday, after the stimulus announcement by China’s state planner declined.
The New Zealand dollar rebounded 0.43 percent to $0.6089, but only after falling 1.19 percent to a three-week low of $0.6053 on Wednesday, when the central bank cut interest rates by half a percentage point and hinted at further easing to come.