© Reuters. People visit a currency exchange office in Istanbul, Turkey July 18, 2023. REUTERS/Dilara Senkaya/File Photo
By Brigid Riley
TOKYO (Reuters) -The U.S. dollar held to narrow ranges against its major peers on Tuesday, as traders awaited the Federal Reserve’s monetary policy decision this week for clues on when the U.S. central bank might cut rates.
Data on job openings from the U.S. Department of Labor Statistics due later on Tuesday will in the meantime offer a prelude to the closely watched payroll report to be released on Friday.
The dollar index held steady during Asian hours, last trading around 103.50 as market participants moved cautiously ahead of the two-day Fed meeting that begins on Tuesday.
With the Fed expected to hold interest rates steady, markets will focus on the tone that Fed Chair Jerome Powell strikes at the press conference on Wednesday and any hints of rate cuts in the near future.
Markets are currently pricing in a 46.6% chance that the U.S. central bank will begin cutting in March, dropping from 73.4% a month ago, according to the CME Group’s (NASDAQ:CME) FedWatch Tool, as data has been reinforcing the view that the U.S. economy remains resilient.
“I suspect that the FOMC meeting will not be as dovish as current market pricing suggests,” said Matt Simpson, senior market analyst at City Index.
“If recent Fed comments are anything to go by, the Fed are unlikely to release a dove into the crowd – and that risks a bounce for the U.S. dollar and yields.”
Tuesday’s U.S. job opening figures will kick off a week of domestic jobs data, culminating in the January U.S. payrolls report on Friday. The data will give further indications of the state of the world’s largest economy.
The euro was down 0.09% at $1.0822 ahead of flash GDP data for the fourth quarter in the euro zone, where expectations are for a much weaker outlook than in the U.S.
Sterling was unchanged at $1.2709, holding firm ahead of the Bank of England’s monetary policy meeting this week.
Elsewhere, the U.S. currency gave up 0.06% against the yen at 147.38 per dollar.
With Japanese policy normalisation looking more likely in the second quarter, when the Bank of Japan will have additional wage data, the dollar-yen rate will “be more driven by the Fed than any expectations of a policy shift by the BOJ in the short term,” said Wei Liang Chang, currency and credit strategist at DBS.
“We thus expect dollar/yen to ease more pronouncedly towards the end of Q1.”
Japan’s jobless rate fell to 2.4% in December from the previous month, government data showed on Tuesday, just under economists’ median forecast of 2.5% in a Reuters poll.
The Australian dollar climbed 0.08% versus the greenback to $0.6616, after rising to a two-week high of $0.6625.
Data revealed domestic retail sales slid 2.7% in December following a 1.6% rise in November, as Black Friday bargains brought spending forward.
The kiwi was up 0.2% at $0.6144, supported by comments from the chief economist at the Reserve Bank of New Zealand that inflation was still far too high.
In cryptocurrencies, bitcoin rose 0.41% to $43,355.85, after touching its highest level since Jan. 12, at $43,777.00, earlier in the session.
Source: Investing.com
