16.5 C
New York
Tuesday, May 30, 2023

Dollar slips as Fed outlook shifts

Dollar slips as Fed outlook shifts
© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/Illustration

 

BTC/USD
-1.51%

Add to/Remove from Watchlist

Add to Watchlist

Add Position

Position added successfully to:

Please name your holdings portfolio

Type:

BUY
SELL

Date:

 

Amount:

Price

Point Value:

Leverage:

1:1
1:10
1:25
1:50
1:100
1:200
1:400
1:500
1:1000

Commission:

 

Create New Watchlist
Create

Create a new holdings portfolio
Add
Create

+ Add another position
Close

By Tom Westbrook

SINGAPORE (Reuters) – The dollar was under pressure near seven-week lows on Thursday after the U.S. Federal Reserve sounded close to calling time on interest rate hikes, which markets think are more or less over.

The Fed raised its benchmark funds rate by 25 basis points, as expected, but dropped language about “ongoing increases” being needed in favour of “some additional” rises, as it watches how wobbling confidence in banks affects the economy.

Futures imply only an even chance of one more hike, in contrast to Europe where markets see another 50 bps or so to go. The gap has sent the euro surging, with it touching a seven-week high of $1.0912 on Wednesday and coming close to testing it again at $1.0898 in the Asia session.

Sterling also hovered near a seven-week high as British inflation unexpectedly rose, leaving it at an eye-watering 10.4% and heaping pressure on the Bank of England to raise rates and sound hawkish at its meeting later in the day.

Markets have priced a 25-bp hike from the BoE.

Traders also expect a 50 bp hike at the Swiss National Bank, which has the franc recovering from a slide it suffered at troubles at Credit Suisse had traders nervous.

The shift in tone from the Fed makes it less likely that markets go back to worrying that strong economic data drives rates higher, said NatWest Markets head of G10 FX strategy Brian Daingerfield.

“From the foreign exchange perspective, we think that argues for further dollar weakness as the ceiling for the Fed cycle has clearly come down.”

The dollar had earlier found a footing when U.S. Treasury Secretary Janet Yellen spooked markets by telling Congress she has not considered or discussed blanket bank deposit insurance.

But that mostly reversed in Asia.

The Australian and New Zealand dollars rose 0.7% and 0.8% respectively to track back toward Wednesday’s peaks. Dollar/yen, which closely follows U.S. yields, fell 0.7% to a six-week low of 130.50. Two-year U.S. Treasury yields fell 11 bps, extending a drop of about 20 bps on Wednesday. [US/]

Financial markets have been roiled by wavering confidence in banks globally following a run on Silicon Valley Bank two weeks ago and the sudden demise of Credit Suisse.

The focus on the banking front is now primarily on U.S. regional lenders where worry of a contagious run on deposits remains elevated.

Fed Chair Jerome Powell said deposit flows have stabilised in the last week, and smaller lenders said they took some comfort from Yellen’s remarks that deposit insurance would be considered were there to be a contagion risk.

That “took the anxiety out of the room,” according to Daniel Kimbell, an executive at the local Passumpsic Bank in St Johnsbury, Vermont. Regional lenders shares, however, fell. [.N]

Bitcoin fell 3% to $27,360 on Wednesday and was held near level on Thursday after a series of U.S. Securities and Exchange Commission lawsuits over crypto promotion put a dampener on digital assets.

========================================================

Currency bid prices at 0335 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.0897 $1.0856 +0.40% +0.00% +1.0905 +1.0854

Dollar/Yen

130.5650 131.3900 -0.70% +0.00% +131.4550 +130.4700

Euro/Yen

142.31 142.67 -0.25% +0.00% +142.7900 +142.2000

Dollar/Swiss

0.9154 0.9175 -0.22% +0.00% +0.9173 +0.9151

Sterling/Dollar

1.2316 1.2269 +0.41% +0.00% +1.2324 +1.2266

Dollar/Canadian

1.3676 1.3732 -0.41% +0.00% +1.3733 +1.3664

Aussie/Dollar

0.6729 0.6685 +0.67% +0.00% +0.6735 +0.6682

NZ

Dollar/Dollar 0.6270 0.6222 +0.78% +0.00% +0.6276 +0.6221

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

Source: Investing.com

Related Articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Stay Connected

11,268FansLike
12,893FollowersFollow
736FollowersFollow
- Advertisement -

Latest Articles

Popular Articles