SINGAPORE/LONDON — The dollar was
trading near its weakest levels in months against the euro and
pound on Wednesday after sliding overnight on
cooler-than-expected inflation data which fueled bets the
Federal Reserve will outline a slower rate hike path.
After delivering four consecutive 75 basis point (bp) hikes,
the U.S. central bank is widely expected to increase interest
rates by 50 bp as it concludes its two-day meeting on Wednesday.
Traders will then turn their focus to Thursday meetings of
the Bank of England and the European Central Bank, where
consensus is also for a 50 bp rate hike.
The euro was steady against the dollar at $1.0642,
not far off a six-month intraday high of $1.0673 it touched in
the previous session after U.S. CPI data.
The pound, which also hit a six month high after
the U.S. figures, was flat at $1.2376 after a brief dip when
British inflation data too showed a sharper than expected fall.
But year-on-year inflation of 10.7%, compared to a predicted
10.9%, remains painfully high for British consumers.
U.S. consumer prices rose less than expected for a second
straight month in November, with underlying consumer prices
advancing by the least in 15 months, Tuesday’s report from the
Labor Department showed.
That data served to reinforce existing expectations that the
Fed will slow the pace of its rate increase to 50 bp, and so the
main focus of Wednesday’s meeting will be the Fed’s quarterly
‘dot plot’, which shows where policymakers expect rates to be at
the end of each year, and remarks by chair Jerome Powell.
An increase in the median ‘dot’ for the level at the end of
2023 from the 4.625% projection at end September is widely
expected, but a key question is how much it will rise by.
“The extent of the uptick revision will matter for rates and
USD,” said Christopher Wong, a currency strategist at OCBC in
“A revision higher than median of 5.125% may be interpreted
as hawkish and could weigh on sentiment and halt the dollar’s
decline. But if it turns out that despite the hawkish talk and
there is only slight uptick to median, then the USD may face
more selling pressure.”
The dollar index, which measures the greenback versus
six major currencies, was down a touch at 103.91, having made a
six-month low of 103.57 in the wake of the inflation data.
It has fallen 9% since hitting a 20-year high in September
as expectations of high and rising U.S. interest rates, which
fueled dollar gains, have started to ease.
The dollar was at 135.27 yen, down 0.2% after
sliding 1.5% on Tuesday, and at 0.9277 Swiss francs,
down a whisker having fallen to an eight-month low of 0.9230 on
Currency bid prices at 0906 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
$1.0642 $1.0630 +0.11% -6.39% +1.0645 +1.0619
135.2750 135.5050 -0.16% +17.62% +135.7250 +135.2300
0.9277 0.9286 -0.08% +1.72% +0.9296 +0.9271
1.2376 1.2365 +0.07% -8.50% +1.2381 +1.2345
1.3540 1.3544 -0.03% +7.09% +1.3574 +1.3536
0.6867 0.6858 +0.15% -5.52% +0.6870 +0.6822
Dollar/Dollar 0.6446 0.6463 -0.29% -5.84% +0.6464 +0.6434
Tokyo Forex market info from BOJ
(Reporting by Ankur Banerjee in Singapore; Editing by Edwina
Gibbs, Simon Cameron-Moore and Alexander Smith)
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