Dollar set for worst week since July as traders bet on Fed cut
SINGAPORE, Nov 28 — The dollar was heading for its worst weekly performance since late July on Friday as traders ramped up bets for further US monetary easing next month, while an outage at CME Group halted trading in a number of currency pairs on its platform,
The CME disruption further reduced liquidity already thinned by the Thanksgiving holiday in the US
The dollar index, which measures the greenback’s strength against a basket of six major peers, was up 0.1 per cent at 99.599, recovering some ground after five days of decline pushed it to its biggest one-week loss since July 21.
“With thinner trades due to the US Thanksgiving holiday, FX volatility has eased,” analysts from DBS wrote in a research note.
US Fed funds futures are pricing an implied 87 per cent probability of a 25-basis-point cut at the Federal Reserve’s next policy meeting on December 10, compared with a 39 per cent chance a week earlier, the CME Group’s FedWatch tool showed.
The yield on the US 10-year Treasury bond was up 1.3 basis point at 3.9998 per cent, rebounding after five down days.
In Asia, the Japanese yen fluctuated between gains and losses against a backdrop of persistent weakness in the currency that has led to the prospect of intervention from the Ministry of Finance. It was fetching 156.33 yen as labour market and inflation data firmed up the case for monetary tightening in Asia’s second-biggest economy.
The yen is on track for a third month of decline as Prime Minister Sanae Takaichi sets out a ¥21.3 trillion (RM559 billion) stimulus package, while the Bank of Japan has held off hiking interest rates even as inflation runs above target.
“I’m struggling to look for any real direction now to be honest,” said Bart Wakabayashi, Tokyo branch manager at State Street.
“Dollar-yen is really really tricky at the moment,” he said, citing statements and policy announcements from Takaichi, the geopolitical spat with China, contradictory trends in economic data, and the threat of intervention.
The currency had briefly edged higher on news that consumer prices in Tokyo rose at a slightly faster-than-expected 2.8 per cent rate in November.
“With the labour market still tight and inflation excluding fresh food and energy set to remain above 3 per cent for now, the Bank of Japan will resume its tightening cycle over the next couple of months,” analysts from Capital Economics wrote in a research report. “The upshot is that the case for tighter monetary policy remains intact.”
The euro slipped 0.1 per cent to US$1.1582 as Ukraine’s President Volodymyr Zelenskiy on Thursday said Ukrainian and US delegations are to meet this week to work out a formula discussed at talks in Geneva to end war with Russia and provide security guarantees for Kyiv.
Sterling was 0.1 per cent weaker at US $1.3232, heading for its best weekly performance since early August, after Britain’s finance minister, Rachel Reeves, revealed plans to raise taxes by £26 billion on Wednesday.
The Australian dollar fetched US$0.6536, weakening 0.1 per cent, while the kiwi slipped 0.2 per cent to US$0.5725 at the end of its biggest one-week surge since late April, after the nation’s central bank on Wednesday virtually shut the door on any further rate cuts.
The offshore yuan was at 7.072 yuan per US dollar, steady in Asian trade and on track for its best monthly performance since August.
