Written by Alden Bentley
NEW YORK/LONDON (Reuters) – The U.S. dollar rose on Wednesday ahead of the release of records of the Federal Reserve’s decision in September to cut interest rates by 50 basis points, reflecting confidence that the central bank will not continue to ease aggressively.
Concerns about demand from China were the main topic throughout the week, amid disappointment in follow-up stimulus measures taken last month. The Australian and New Zealand currencies were particularly hard hit on Wednesday.
While minutes from the Federal Open Market Committee’s latest meeting could show how heated the debate over a larger-than-expected cut is, they will be somewhat out of date after last Friday’s strong non-farm payrolls data caused markets to reprice the Fed’s long-term interest rate. near. Cut expectations.
The euro continued its recent selling operations to its lowest level in two months against the US currency, and fell in the latest transactions by 0.26% to $1.0953. USD/JPY rose 0.61% to match Monday’s high of 149.10, which was the highest since August 16.
The yen has come under sharp criticism since new Japanese Prime Minister Shigeru Ishiba, known for his criticism of loose monetary policy, surprised markets with his recent comments that the country is not ready for further interest rate hikes.
Ishiba set early elections for October 27, before the Bank of Japan’s monetary policy meeting in October and the US presidential election on November 5.
The index, which measures the greenback against a basket of currencies including the yen and euro, continued its rise to the highest level since August 16 and was 0.26% stronger at 102.76.
Traders are also watching a presentation by Fed speakers on Wednesday and awaiting the release of the September CPI on Thursday.
“The big thing now is that we have the CPI tomorrow,” said Mark Chandler, chief market strategist at Bannockburn Global Forex. “I think China’s announcement that they’re going to make another announcement on Saturday, the Finance Ministry, is important.” New York. “Although we don’t see much impact here today in the dollar bloc.”
Looking at the structure of federal funds futures, traders see an 88% chance of a 25 basis point cut at the November meeting, and about 50 basis points by the end of the year, according to LSEG calculations.
Dallas Fed President Lori Logan said on Wednesday that she supported the large rate cut last month, but wanted smaller cuts in the future, given the “still real” upside risks to inflation and “significant uncertainties” about the economic outlook. .
Names also later listed include Chicago Fed President Austin Goolsbee, Richmond Fed President Thomas Barkin, Fed Vice Chairman Philip Jefferson, and later Boston Fed President Susan Collins and San Francisco Fed President Mary Daly.
China’s Finance Ministry on Wednesday called a Saturday news conference on fiscal policy, raising stimulus expectations, a day after a news conference from the state planner – the National Development and Reform Commission – which disappointed markets by not providing major new stimulus details.
But that did little for the US dollar, which was down 0.36% at US$0.6721. The yuan fell to 7.0810 to the dollar.
The New Zealand dollar was one of the biggest movers on Wednesday after the Reserve Bank of New Zealand cut interest rates by 50 basis points,
The index fell 1.14 percent to 0.6069 US dollars, recording its lowest level in about two months
“We see near-term headwinds mounting (for NZD/USD) including hawkish Fed repricing, potential geopolitical escalation, de-risking ahead of the US election, exhaustion of momentum on trade, and now further escalation.” “The Reserve Bank of New Zealand has been more dovish than expected,” said Lenny Jin, global foreign exchange strategist at HSBC.
“Potentially strong fiscal stimulus from China presents an upside risk but (the Australian dollar) is set to benefit further.”