By Brigid Riley
(Reuters) – The dollar held near its lowest in more than a year against a basket of currencies on Wednesday, while sterling traded near multi-year highs, as markets focused on signs of the size of a widely expected U.S. interest rate cut next month.
Cryptocurrency Bitcoin grabbed the spotlight in Asia, falling more than 4% after breaking support at around $60,000.
The Australian dollar rose to an eight-month high after data showed domestic inflation slowed to a four-month low in July but overall progress in curbing price gains was disappointing. The dollar was last flat at $0.06793.
“The RBA is unlikely to change its stance at the September meeting, which could add another layer of strength to the AUD in the near term alongside cyclical USD weakness and stable global growth dynamics,” said Charu Chanana, Head of FX Strategy at Saxo.
Elsewhere, overall moves in the foreign exchange market were muted as traders waited for fresh hints on the state of the world’s largest economy.
Investors are unanimously in agreement that the Federal Reserve will start cutting interest rates next month after Chairman Jerome Powell’s dovish tone last week, with the debate now focusing on whether it will be a massive 50 basis point cut or not.
Current pricing is at a 36% chance of a bigger cut, up from 29% a week ago, according to the CME Group (NASDAQ:) FedWatch tool.
Markets, which have fully priced in a 25 basis point rate cut next month, are now expecting a 100 basis point rate cut by the end of the year.
Preliminary estimates of second-quarter U.S. gross domestic product are due later this week, along with core personal consumption expenditures, the Fed’s preferred gauge of inflation.
But with attention shifting from inflation to the strength of the economy, the significance of this week’s PCE data is “debatable,” said Matt Simpson, chief market analyst at City Index.
“It would take a strong upside surprise to dispel expectations of multiple rate cuts by the Fed.”
The dollar, which measures the greenback’s value against a basket of currencies, was last up 0.2 percent at 100.78, hovering above a 13-month low of 100.51 hit in the previous session.
Over the month, the dollar fell 3.4%, putting it on track for its biggest monthly decline since November 2022.
But given that markets have been anticipating monetary policy easing since September for weeks now, the dollar’s downward momentum appears to be waning, with support building around 100.18/30, according to Simpson.
The pound fell 0.14 percent to $1.3243 after hitting its highest level since March 2022 against the US dollar at $1.3269 on Tuesday.
The euro fell 0.24% to $1.1156, but remained close to a 13-month high touched at the start of the week.
The yen fell further from Monday’s three-week high of 143.45 against the dollar, and was last down 0.23 percent at 144.33 yen per dollar.
The New Zealand dollar fell 0.1% to $0.6246. In cryptocurrencies, bitcoin fell 4.1% to $59,329 after falling more than 6% earlier in the session.
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