FX Rate News

The dollar languished near its weakest level in a month against major peers on Friday, hurt by a stronger euro as traders bet on earlier European interest rate hikes and as an equity rally sapped demand for safer assets.

New Zealand’s dollar sagged amid a slide in consumer confidence, while cryptocurrency ether climbed to a record high.

The dollar index, which measures the currency against six main rivals including the euro, was little changed at 93.354, close to Thursday’s low at 93.277 — a level not seen since Sept. 27.
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The euro was largely flat at $1.16855 after rising as high as $1.1692 overnight for the first time since Sept. 28.

Against the yen, another traditional safe haven, the dollar was mostly unchanged at 113.50, continuing to ease back gradually from the almost three-year high of 114.695 reached last week.

An index of global shares rose to the cusp of a record peak this week, powered by an earnings-driven rally to consecutive record highs on Wall Street, including overnight.

The euro was propelled on Thursday after comments by European Central Bank President Christine Lagarde were interpreted in some quarters as not going far enough in affirming the central bank’s dovish stance.

Foreign-exchange markets have become volatile around central bank activity. Big moves began Wednesday with hawkish comments from the Bank of Canada, and were followed on Thursday with an action by the Reserve Bank of Australia and the ECB’s remarks — all ahead of meetings next week of the U.S. Federal Reserve and the Bank of England.

The Fed is widely expected to begin to taper stimulus from next month, with interest rate lift-off following next year.

Lagarde’s “pushback was not forceful enough,” opening the way for the euro to test $1.1680 in the near term, TD Securities strategists wrote in a note.

However, “extrapolating (euro strength) beyond that seems like a big ask a week ahead of the Fed’s meeting where taper will be announced,” they said.

Traders will have their eyes on economic gauges from both regions later in the day, with Europe seeing a preliminary reading of the consumer price index, while the U.S. gets personal spending and income data.

Elsewhere, sterling was almost flat at $.1.37925 as it continued to fluctuate near a one-month high reached last week.

The pound has been buffeted recently by speculation over whether the Bank of England would proceed with an interest rate hike at its meeting next week.

The Australian dollar was largely unchanged at $0.75425, after reaching the highest since early July at $0.75555 in the previous session.

That uptick was fueled when the RBA declined to buy a government bond at the heart of its stimulus program, fanning speculation the central bank will allow rates to rise earlier than expected. The central bank again resisted buying the key bond earlier on Friday.

The New Zealand dollar fell 0.3% to $0.71795 after a gauge of consumer confidence dipped sharply in October.

In cryptocurrencies, ether rose to a record $4,400, while bigger rival bitcoin also gained to trade around $62,000, but down from the record $67,016.50 reached last week.

The dollar inched higher against the safe-haven yen while easing a touch against riskier currencies on Tuesday as solid company earnings and a glimmer of improvement in U.S.-China trade ties lifted sentiment, while rates expectations weighed on the euro.

The greenback was last up 0.2% at 113.93 yen and was holding steady against the euro at $1.1599. Moves were slight as traders eye central bank meetings in Europe, Japan and Canada this week and data releases in Australia and the United States.

China’s Vice Premier Liu He and U.S. Treasury Secretary Janet Yellen held a video call which readouts from both sides suggested was at least not acrimonious.

Meanwhile earnings have driven U.S. stock markets to fresh peaks and car-maker and mood barometer Tesla to a valuation above $1 trillion.

The risk-sensitive Australian dollar rose about 0.3% and poked past 75 U.S. cents to $0.7513, China’s yuan was firm near a four-month high at 6.3845 per dollar and the South Korean won hit a seven-week peak.

“The dollar has been reversing lower because of a more risk- on market, and that’s due to earnings coming in better than expected,” said Bank of Singapore analyst Moh Siong Sim, while investors await data and central bank meetings for direction.

The U.S. dollar index held at 93.856 — in between a one-year high of 94.563 hit earlier in the month and a one-month low of 93.483 made on Monday. Analysts expect it might stay there through a slew of central bank meetings in coming days.

“The dollar looks to be finding its feet in the mid-93s,” analysts at Westpac said in a note, as focus turns first to U.S. growth data on Wednesday and then to the European Central Bank’s meeting on Thursday.

Data and policy

Anticipation of the ECB pushing back on market inflation forecasts — as well as a soft German sentiment survey on Monday — have dragged on the euro ahead of Thursday.

The ECB will likely underscore its dovish guidance, while U.S. GDP will show the economy’s rebound stalling, Westpac’s analysts said, though the scene remains set for the Federal Reserve to announce a reduction in bond purchases next week.

“All told that should keep short-term yield spreads trending in the dollar’s favour and leave the dollar with a bid tone.”

Central bank meetings in Japan and Canada are also scheduled this week and rising inflation in Canada has increased pressure on policymakers to pull forward rate hikes. Traders are watching Wednesday’s meeting for any hawkish clues.

The Canadian dollar stands at C$1.2383 per dollar, having scaled a four-month peak last week.

No changes are expected from the Bank of Japan, although Reuters has reported that policymakers are discussing an end to a COVID-19 loan scheme.

Australian quarterly inflation data due on Wednesday is also likely to set the tone in a tussle between rates markets and the resolutely dovish Reserve Bank of Australia (RBA).

Economists expect growth in Australia’s trimmed mean consumer prices, the central bank’s preferred measure, to have accelerated to an annual pace of 1.8% in the September quarter from 1.6% in the preceding three months.

Beyond Friday, the Fed, the RBA and the Bank of England meet next week with markets having priced a roughly 60% chance that the Bank of England raises interest rates to head off inflation.

Sterling has been firming at the prospect of higher rates and was last steady at $1.3765. The New Zealand dollar rose 0.1% to $0.7174.

U.S. bonds drove currencies on Wednesday, with a rise in long-term rates pushing the dollar to an almost four-year high on the yen, but a decline in shorter-dated yields putting it on the back foot against most other major peers.

The dollar and yen were also under pressure from a global equity rally that sapped demand for assets regarded as safe havens.

The dollar climbed as high as 114.585 yen for the first time since November 2017, with benchmark 10-year Treasury yields touching a fresh five-month high at 1.6630% in Asia. Higher long-term U.S. yields increase the allure of those assets to Japanese investors.

However, two-year Treasury yields hovered around 0.4050% after retreating sharply overnight from Monday’s 19-month high of 0.4480%, signaling a scaling back of bets for early Federal Reserve interest rate hikes.

That contrasted to a rise in wagers this week for faster rate increases in the U.K. and New Zealand, which also pulled up expectations in neighbors like the euro zone and Australia.

“Risk sentiment remains in the ascendancy,” while “a fall-back in front-end U.S. yields, so symptomatic of a slight paring back in expectations for when Fed rates ‘lift-off’ might occur,” dealt the dollar a double-whammy, Ray Attrill, head of FX strategy at National Australia Bank in Sydney, wrote in a research note.

At the same time, markets are coming to “the — highly belated — realization that whether the Fed raises (its policy) rate in 2022 or not until later, other central banks are getting in ahead of them … with the Bank of England likely next cab off the rank as early as next month,” Attrill said.

The dollar index — which measures the greenback versus six rivals, including the yen — was little changed at 93.822 from Tuesday, when it lost about 0.2% and dipped to the lowest this month at 93.501.

The U.S. economic outlook got a little less rosy on Tuesday after data showed that U.S. homebuilding unexpectedly fell in September and permits dropped to a one-year low amid acute shortages of raw materials and labor, supporting expectations that economic growth slowed sharply in the third quarter.

Richmond Fed President Thomas Barkin said on Tuesday that U.S. labor shortages may outlast the coronavirus pandemic and limit overall economic growth unless the country comes up with better education, health and childcare policies to boost the number of people willing and able to work.

The euro was about flat at $1.16335 from Tuesday, when it jumped as high as $1.1670 for the first time since Sept. 29.

Sterling was little changed at $1.3793 after touching a one-month peak of $1.3834 in the previous session.

The risk-sensitive Australian dollar traded slightly weaker at $0.74725, but remained close to Tuesday’s more than three-month top at $0.74855.

New Zealand’s kiwi dollar was little changed at $0.71565, near the highest since June 11 at $0.7172, reached overnight.

In the equities space, Asia-Pacific stocks extended a global rally on Wednesday, with an index of regional shares adding 0.33%.

“The move in equities has seen the USD and JPY shunned,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.

“It’s really just pick a JPY cross and see the ‘rip your face off’ move,” he said. “This is a momentum play here and timing the pullback in JPY crosses is key, but it doesn’t feel like we’re going to see a rush to cover JPY shorts anytime soon in this dynamic.”

U.S. bonds drove currencies on Wednesday, with a rise in long-term rates pushing the dollar to an almost four-year high on the yen, but a decline in shorter-dated yields putting it on the back foot against most other major peers.

The dollar and yen were also under pressure from a global equity rally that sapped demand for assets regarded as safe havens.

The dollar climbed as high as 114.585 yen for the first time since November 2017, with benchmark 10-year Treasury yields touching a fresh five-month high at 1.6630% in Asia. Higher long-term U.S. yields increase the allure of those assets to Japanese investors.

However, two-year Treasury yields hovered around 0.4050% after retreating sharply overnight from Monday’s 19-month high of 0.4480%, signaling a scaling back of bets for early Federal Reserve interest rate hikes.

That contrasted to a rise in wagers this week for faster rate increases in the U.K. and New Zealand, which also pulled up expectations in neighbors like the euro zone and Australia.

“Risk sentiment remains in the ascendancy,” while “a fall-back in front-end U.S. yields, so symptomatic of a slight paring back in expectations for when Fed rates ‘lift-off’ might occur,” dealt the dollar a double-whammy, Ray Attrill, head of FX strategy at National Australia Bank in Sydney, wrote in a research note.

At the same time, markets are coming to “the — highly belated — realization that whether the Fed raises (its policy) rate in 2022 or not until later, other central banks are getting in ahead of them … with the Bank of England likely next cab off the rank as early as next month,” Attrill said.

The dollar index — which measures the greenback versus six rivals, including the yen — was little changed at 93.822 from Tuesday, when it lost about 0.2% and dipped to the lowest this month at 93.501.

The U.S. economic outlook got a little less rosy on Tuesday after data showed that U.S. homebuilding unexpectedly fell in September and permits dropped to a one-year low amid acute shortages of raw materials and labor, supporting expectations that economic growth slowed sharply in the third quarter.

Richmond Fed President Thomas Barkin said on Tuesday that U.S. labor shortages may outlast the coronavirus pandemic and limit overall economic growth unless the country comes up with better education, health and childcare policies to boost the number of people willing and able to work.

The euro was about flat at $1.16335 from Tuesday, when it jumped as high as $1.1670 for the first time since Sept. 29.

Sterling was little changed at $1.3793 after touching a one-month peak of $1.3834 in the previous session.

The risk-sensitive Australian dollar traded slightly weaker at $0.74725, but remained close to Tuesday’s more than three-month top at $0.74855.

New Zealand’s kiwi dollar was little changed at $0.71565, near the highest since June 11 at $0.7172, reached overnight.

In the equities space, Asia-Pacific stocks extended a global rally on Wednesday, with an index of regional shares adding 0.33%.

“The move in equities has seen the USD and JPY shunned,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.

“It’s really just pick a JPY cross and see the ‘rip your face off’ move,” he said. “This is a momentum play here and timing the pullback in JPY crosses is key, but it doesn’t feel like we’re going to see a rush to cover JPY shorts anytime soon in this dynamic.”

The dollar languished near the bottom of its recent range against major peers on Tuesday, knocked back by weak U.S. factory data overnight and on market wagers of faster normalization of monetary policy in other countries.

The dollar index, which measures the greenback against six peers, weakened 0.05% to 93.894 from Monday. It has oscillated for the past three weeks between 93.671 and the one-year high of 94.563, reached last Tuesday.

Over the past week though, it has trended lower, with a tapering of Federal Reserve stimulus as early as next month already priced in, along with a first interest-rate increase next year.

A recovery in risk sentiment has also weighed on the safe-haven U.S. currency.

Elsewhere, Bank of England Governor Andrew Bailey sent a fresh signal for early U.K. rate hikes by saying on Sunday that the central bank will “have to act” to counter rising inflation risks. In New Zealand, bets for faster policy normalization were stoked on Monday by data showing the fastest consumer-price inflation in more than a decade.

The U.K. and New Zealand led a rise in short-term bond yields globally, with rates in Europe and Australia climbing comparatively more than those in the U.S., pressuring the dollar.

“The sense that ‘transitory’ inflation will last longer than previously thought has been the main catalyst” as “the market re-calibrated rate hike expectations in most jurisdictions,” Westpac strategists wrote in a research note.

However, the U.S. is likely to be insulated by energy market bottleneck that is “casting an ongoing cloud over rebound prospects in Europe and China,” which “should leave yield spreads at the front end continuing to drift in the USD’s favour,” they said, adding that pullbacks in the dollar index should be limited to 93.70.

However, Westpac remains bullish on New Zealand’s kiwi dollar — which isn’t part of the dollar index — targeting a climb to $0.74 by year-end, and recommending buying any dips to $0.6985.

The kiwi rose 0.11% to $0.7093, edging back toward a one-month high of $0.7105 reached on Monday.

The Aussie dollar gained 0.09% to $0.74225, approaching a more than one-month high of $0.7440 touched at the end of last week, even after minutes of the Reserve Bank of Australia’s September meeting showed on Tuesday that policymakers are concerned tighter policy could harm the labor market.

Sterling added 0.13% to $1.37455, nearing Friday’s one-month peak at $1.3773.

The euro advanced 0.09% to $1.16205, approaching the top of this month’s trading range.

Against the safe-haven yen, the dollar was little changed at 114.275, but not far from the almost three-year high of 114.47 touched on Friday.

U.S. manufacturing output was hurt as an ongoing global shortage of semiconductors depressed motor vehicle output, providing further evidence that supply constraints were hampering economic growth.

“Our strong USD forecast published in early July reflected — among other things — U.S. economic outperformance, but the USD’s drivers may be changing,” Commonwealth Bank of Australia strategist Joseph Capurso wrote in a client note.

“The spike in global inflation and interest rates may support the USD as a safe haven if short-term interest rates price in a global monetary tightening cycle that it so strong it forces equities to correct lower,” with evidence of that scenario likely seen in a decline in USD/JPY and AUD/JPY, he said.

The dollar made a wobbly start to the week on Monday with the kiwi and sterling edging higher after a red-hot inflation readout in New Zealand and hawkish remarks from Britain’s central bank chief that put rate rises in investors’ sights.

The dollar index has now slipped about 0.6% from last week’s 2021 highs as investors figure that while price pressures might pull forward hikes by the Federal Reserve, other central banks may need to be more aggressive over the tightening cycle.

New Zealand reported its biggest quarterly jump in consumer prices in a decade on Monday. Bank of England Governor Andrew Bailey said on Sunday that surging energy prices would prolong a pulse in inflation and policymakers “will have to act” if they see risks.

The data lifted the kiwi by about 0.3% to a one-month high of $0.7105. Sterling rose 0.1% to $1.3762, just shy of Friday’s one-month high of $1.3773.

The Australian dollar was also near its highest in six weeks and oscillated around $0.7413. Oil futures stood at fresh three-year highs and stoked expectations that even more price rises are heading along global supply chains.

“The rest of the world is probably outpacing the U.S. in inflation, for now, and it puts more pressure on those central banks than the U.S. one,” said Westpac currency analyst Imre Speizer.

In New Zealand, he said, the surprise leap in prices would only reinforce the need for the Reserve Bank of New Zealand to stay the course on its hiking trajectory, he added.

The dollar made small gains on the euro and was steady on the yen, last trading for $1.1587 per euro and buying 114.22 yen.

Bitcoin, vaunted as an inflation hedge and riding high on hopes for U.S. approval of a futures-based exchange traded fund that would funnel cash into the sector, hovered just shy of its record peak of $64,895. It last bought $62,233.

Fed funds futures are now fully pricing U.S. rate hikes to begin next September as inflation pressures rise, however a relatively shallow cycle is expected, with pricing suggesting rates could linger at 1.5% through 2026.

Swaps pricing suggests swifter and more prolonged action is now more likely elsewhere — with an almost 30% chance of a Bank of England rate hike this year and nearly 80 basis points of hikes priced through 2022.

Even in Australia, where the central bank has insisted it expects to keep rates on hold until 2024, swaps are pricing hikes to start in mid 2022 and for 100 bps of hikes before 2024 even begins.

Chinese gross domestic product data is due on Monday, with analysts expecting a slowdown, and there is an intense focus on China’s credit markets where a slew of property developers have coupon payments due.

The yuan was firm in offshore trade at 6.4324 per dollar.

The dollar headed for its first weekly decline versus major peers since the start of last month, falling back from a one-year high as traders turned their attention to when the U.S. Federal Reserve will start raising interest rates.

The dollar index, which measures the greenback against six rivals, was little changed at 94.034 on Friday. It is on track for about a 0.1% decline this week despite hitting the highest since Sept. 25 of last year at 94.563 on Tuesday.

Improved market sentiment, which has lifted global stocks, commodity prices and bond yields, is also weighing on the safe-haven dollar.

Only against the yen — another safe haven — has the dollar managed to maintain the momentum of the past five weeks, rising 0.16% on Friday and touching 113.885 yen for the first time since December of 2018.

“We end the week with risk flying,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.

“Equities are going up hard, and the JPY has no place as a hedge,” because it would just drag on overall portfolio performance, Weston said.

The greenback had rallied since early September on expectations the U.S. central bank would tighten monetary policy more quickly than previously expected amid an improving economy and surging energy prices.

Minutes of the Fed’s September meeting confirmed this week that a tapering of stimulus is all but certain to start this year, although policymakers are sharply divided over inflation and what they should do about it.

Money markets are currently pricing in about 50/50 odds of a 25 basis point rate hike by July.

The dollar index is “looking a little shaky, but any slippage should prove modest” with Fed tapering now imminent, Westpac strategists wrote in a client note.

Any dips in the index should be limited to 93.70, they said.

The next major test of the U.S. economy’s health comes later on Friday with the release of retail sales figures.

The euro slipped 0.09% to $1.1588 after touching $1.1624 on Thursday for the first time since Sept. 4.

Sterling was little changed at $1.36705 following its climb to the highest since Sept. 24 at $1.3734 overnight.

The risk-sensitive Aussie dollar edged down 0.07% to $0.74105, after reaching a more than one-month high of $0.74265 in the previous session.

New Zealand’s kiwi dollar lost 0.06% to $0.7033, holding most of Thursday’s 1% surge, which took it to the highest since Sept. 24 at $0.70415.

In cryptocurrencies, bitcoin held around $57,200 after touching a five-month high of $58,550 on Thursday.

Smaller rival ether traded at around $3,780, still close to a more than one-month high of $3,825.89 reached overnight.

The dollar eased back from a one-year high versus major peers on Wednesday ahead of U.S. consumer price data that could provide additional clues on when the Federal Reserve will taper stimulus and raise interest rates.

The dollar index, which measures the greenback against six rivals, slipped 0.18% to 94.358 from Tuesday, when it touched 94.563 for the first time since late September 2020.

The U.S. currency weakened 0.13% to 113.465 yen, down from a three-year high of 113.785 yen reached in the previous session.

The euro climbed 0.18% to $1.1551, off Tuesday’s $1.1522, its lowest in nearly 15 months.

“The CPI is going to be really important, so there may be a little bit of positioning ahead of that,” said Joseph Capurso, a strategist at Commonwealth Bank of Australia in Sydney.

“The risk is for inflation to stay high, and that would bring forward market expectations for the timing and pace of rate hikes, and that will support the U.S. dollar. It’s off a little bit today but I think the dollar has more upside.”

The dollar gained on Tuesday amid rising expectations the Fed will announce a tapering of stimulus next month, with interest rate hikes following next year.

Money markets priced about a 50-50 chance of a rate increase by July, after three Fed policymakers said overnight that the U.S. economy has healed enough to begin to scale back the central bank’s asset-purchase program, including Vice Chair Richard Clarida.

Meanwhile, a surge in energy prices has fueled inflation concerns and stoked bets that the Fed may need to move faster to normalize policy than officials had projected.

“CPI is the main economic draw” on Wednesday, and “has the potential to see Fed rate hike expectations move again, one way or another,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.

Most Fed policymakers continue to say inflationary pressures will prove transitory.

Governors Lael Brainard and Michelle Bowman are among the Fed officials due to speak later Wednesday, when the minutes of the central bank’s September meeting are also due to be released.

Sterling strengthened 0.19% to $1.36135, but remained around the middle of this month’s range.

The Aussie dollar slipped 0.19% to $0.73375, retreating from Tuesday’s one-month high at $0.7384.

Bitcoin traded around $56,200, after reaching a five-month high of $57,855.79 at the start of the week.

The dollar rose to its highest in nearly three years versus the yen on Monday as investors remained confident the U.S. Federal Reserve will announce a tapering of its massive bond-buying next month despite softer U.S. payrolls figures.

The jobs data released on Friday pushed U.S. bond yields higher, and so the yen, which is known for being particularly sensitive to yield differentials, slipped to as low as 112.84 yen per dollar in early London trading on Monday – a level last seen in December 2018.

The Japanese currency was also hurt by a slight tilt towards riskier currencies as sterling and the Australian dollar both gained slightly on the greenback, leaving the dollar’s index a touch lower at 94.137, but not far from a one-year high of 94.504 touched earlier this month.

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The yen has also been weighed down by the continued crude oil rally, given Japan’s status as a net oil importer, said Joel Kruger, currency strategist at LMAX, adding that the currency is also hobbled by monetary policy divergence between the Bank of Japan and its peers, driving a widening yield differential.

“The yen has seen broad selling pressure for the 3rd straight day,” said Kruger. “This is down to a feedback loop with the Japanese stock rally, while broader sentiment has been lifted by PM Kishida’s capital gains tax comment.”

Japan’s Nikkei 225 stock market index rose for a third straight session on Monday, extending its recovery from a six-week low marked last week, as a sharp decline in the yen boosted exporters while a drop in COVID-19 infections added to economic reopening hopes.

Also underpinning stocks, Japanese Prime Minister Fumio Kishida said on Monday he will prioritize boosting wages through tax incentives, rather than imposing higher levies on capital gains and dividends to address Japan’s income gap.

U.S. currency and fixed income markets are closed on Monday for a holiday but benchmark 10-year Treasuries yield hit a four-month high of 1.617% on Friday, even after data showed the U.S. economy created the fewest jobs in nine months in September, significantly underperforming economists’ forecasts.

However, data for August was revised up sharply and the jobless rate dropped to an 18-month low, suggesting fears of labor shortage remain justified, keeping worries about inflation alive and giving the Federal Reserve justification to reduce its emergency stimulus begun last year.

“Although the headline payroll figure was weak, when you look into details, the outlook remains solid and there isn’t anything that would prevent the Fed from tapering next month,” said Shinichiro Kadota, senior FX strategist at Barclays.

The Chinese yuan was little moved by the ongoing travails of Chinese developer China Evergrande Group, even as offshore bondholders brace for news on more than $148 million in looming bond coupon payments after the company missed two coupon deadlines last month.

The offshore yuan was last at 6.4370 per dollar towards the top end of its recent range, but still short of its high of 6.422 hit in September.

The Australian dollar firmed a little, edging nearer to its highest in a month, helped by strong commodities prices and a partial reopening of Sydney, Australia’s largest city.

Concern about inflation is not limited to the United States, with supply disruptions and rising commodity prices affecting many other countries.

The British pound held firmer at $1.3634, extending its recovery from a nine-month low set late last month, on growing expectations that the Bank of England could raise interest rates to curb soaring inflation.

The Canadian dollar changed hands at C$1.2450 per U.S. dollar, having hit a two-month high of C$1.24465 thanks to surprisingly strong Canadian payrolls data and lofty oil prices.

On the other hand, the euro was soft at $1.1575, hovering a tad above its Wednesday’s low of $1.1529, its weakest level since July last year.

In cryptocurrencies, bitcoin gained 3.5% to a new five-month high of $57,092, extending gains made over the weekend, while ether also rose 5% to $3,620.