The dollar stabilized slightly on Wednesday, but remained near its lowest levels in two and a half months against a basket of currencies after the minutes of the last meeting of the Federal Reserve did not succeed in displacing expectations of the end of the cycle of raising interest rates. Minutes from the Fed’s meeting showed that the central bank would act “cautiously” and that “all participants considered it appropriate to maintain” the current interest rate setting.
Fed officials agreed they would raise rates only if progress in controlling inflation falters, reiterating recent comments by policymakers that left the door open for further tightening even as markets move to price in cuts from early next year. “The release of the November FOMC meeting minutes did little to sway the view that the Fed has reached its final interest rate,” the senior market analyst said.
Markets are confident that the Fed will hold interest rates at its December meeting, while anticipating a roughly 30 percent chance of a rate cut as early as March, according to CME’s FedWatch tool. The dollar index, which measures the US currency against a basket of currencies, rose 0.12 percent to 103.65, slightly away from the lowest level in two and a half months of 103.17 that it touched on Tuesday. The index has fallen about 3 percent so far in November and is headed for its worst monthly performance in a year. The euro settled in the latest trading at $1.0908 after rising to its highest levels against the dollar since mid-August to $1.09655 on Tuesday.
Signs that the dollar’s downward movement is losing steam
The pound was mostly steady at $1.2527, a level not far from the two-month high of $1.2558 it touched overnight. “We are seeing signs that the downward movement in the dollar is losing steam” and it could be “due to a bounce,” it was said, adding that the US currency tends to weaken and then strengthen around the time of the Thanksgiving holiday in the US. Which happens on Thursday. Currency strategist V said that market participants were keen to take money off the table before liquidity vanished.
US Treasury yields, which have boosted the dollar, also fell from multi-year highs reached in October as investors intensified bets that the Federal Reserve was done raising interest rates after US inflation slowed in the same month. Treasury yields fell again overnight, with the yield on the benchmark 10-year bond reaching 4.4178 percent.
The Japanese yen fell 0.16 percent to 148.64 yen to the dollar at the start of European trading, after hitting its highest level in two months at 147.155 to the dollar on Tuesday. The Asian currency rose 2 percent against the dollar in November, but is still down 12 percent on the year. While speculation that the Bank of Japan may exit negative interest rates early next year should help stabilize the yen, the Japanese currency still faces strong headwinds. More than 80 percent of economists in a Reuters poll said the Bank of Japan will end its negative interest rate policy next year.
The US central bank is one step ahead
With greater conviction that the central bank is close to exiting its controversial monetary Settings Recent US data indicated the resilience of the world’s largest economy, which strengthened the Federal Reserve’s position on a soft landing. Market analysts said, “US growth is still expected to outperform after the current rebalancing process, which will support US profits and returns.” He added that the dollar still has a “significant return advantage over the yen.
euro and yen have been under selling pressure over the past few trading sessions with investors pricing in sooner than expected exceptional US monetary stimulus, and investors said an unraveling of large bearish bets against the dollar is expected. That should provide support to the dollar in the coming days with a dovish European Central Bank that appears to be far from the Federal Reserve in the monetary policy cycle, traders are expected to refrain from buying the euro against the dollar.
US central bank is one step ahead and as a result the US dollar is likely to remain well supported against the euro,” the strategists said in their daily note British pound continued to fall against the US dollar on Friday, falling below $1.38, weighed down by the Federal Reserve’s hawkish surprise and an unexpected decline in British retail sales.
Economic figures for next week. On Monday, the unemployment rate in Israel and the speech of European Central Governor Lagarde will be announced. On Tuesday, existing home sales and the US Federal Reserve Chairman’s testimony. As for Wednesday, the German and British industrial purchasing managers’ index and US crude oil inventories. As for Thursday, the German Ifo business climate index, the Bank of England’s interest rate decision, the minutes of the British Monetary Policy Committee meeting, orders for basic durable goods, unemployment claims rates
Its interest rate forecasts remain broadly in line with market expectations
For the dollar, the Fed’s hawkish talk has put some wind back in its sails. “It plays into the more hawkish outlook for Fed policy. While the Fed was hawkish this week, its interest rate outlook was still broadly in line with market expectations.” On Friday, the US dollar rose 0.1% against the offshore Chinese yuan at 6.3716 yuan, marking little change after US President Joe Biden’s video call with Chinese President Xi Jinping, as Biden sought to prevent Beijing from giving new life to Russia’s invasion of Ukraine. The talks, which ended without major surprises, helped boost stocks on Wall Street, particularly in the technology sector.
The US dollar index rose in the latest transactions by 0.2 percent to 98.190, but it is far from its highest levels in the session after its decline in the past four days. Then the euro recorded strong losses during currency market transactions, and the major currencies were most affected by a rate of about 3.52 percent, in light of some negative developments. Which affected the trading of the single European currency, and on top of the negative developments is the continuation of the Russian military operation against Ukraine, and fears about the slowdown of the peace talks between the two countries, especially since reports indicate that Russian President Vladimir Putin told the German Chancellor that Ukraine is trying to slow down the peace talks and that it does not intend to Reach an agreement quickly.
