By Kevin Buckland
TOKYO (Reuters) – The dollar held steady on Thursday after its biggest gain since early June, with investors eagerly awaiting speeches by key Federal Reserve policymakers later in the day for clues on the pace of interest rate cuts.
The US currency recorded a powerful rebound overnight, from a more than year-low against the euro and a 2.5-year low against sterling.
While there was no obvious catalyst for a rebound, investors appeared to have a more nuanced view of how aggressive future U.S. rate cuts would be, and Federal Reserve speakers this week did not offer a unified view on the path forward.
Federal Reserve Governor Adriana Kugler said on Wednesday she “strongly supports” the decision to cut rates by half a percentage point earlier this month to kick off a cycle of easing, but she did not comment on her preference for the pace of further cuts.
Earlier this week, Chicago Federal Reserve President Austan Goolsbee said policymakers “can’t be behind” if the economy is to have a supple landing. Atlanta Federal Reserve President Raphael Bostic said the central bank doesn’t need to “go into a frenzy” to cut interest rates.
“I don’t get the sense at this stage that it’s particularly unanimous,” said Kenneth Crompton, chief rates strategist at National Australia Bank (OTC:).
“Looks like they’ve caught up… so it’s probably more like 25 than 50.”
Later Thursday, Fed Chairman Jerome Powell will deliver prerecorded remarks at a conference in New York, where New York Fed President John Williams will also speak. Boston Fed President Susan Collins and Fed Governors Michelle Bowman and Lisa Cook will also take the podium at other locations.
Weekly US jobless claims data will come under scrutiny on Thursday, given the Federal Reserve’s shift in priority to hiring over inflation.
“To the extent that the Fed’s dramatic weakening of the labor market will be an implicit element of what is needed to support market prices for at least one more 50 basis cut this year, that is the best high-frequency indicator we have on that,” NAB’s Crompton said.
Traders are still expecting a second, massive 50-basis-point rate cut at the Federal Reserve’s next meeting in November, but the odds of that have fallen to 57.4% from 58.2% a day earlier, according to data from CME Group’s (NASDAQ:) FedWatch Tool.
The exchange rate, which measures the U.S. currency’s value against the euro, sterling, yen and three other major currencies, was down 0.10% at 100.84 by 04:44 GMT, after rising 0.57% on Wednesday in its biggest one-day gain since June 7.
The euro remained at $1.1143, after falling sharply from $1.1214, the highest level not seen since July last year.
Sterling remained steady at $1.33425. On Wednesday, it rose to $1.3430 for the first time since February 2022.
The yen hit a three-week low of 145.04 per dollar and was last seen at 144.77.
Minutes from the Bank of Japan’s July meeting, where the central bank raised short-term interest rates, showed policymakers were divided on how quickly the central bank should raise rates.
The Australian dollar rose 0.37% to $0.6848, recovering from Wednesday’s edged decline from a 19-month peak of $0.6908. [AUD/]
The rate rose slightly to 7.0149 per dollar in offshore trading, after falling from its highest level since May last year of 6.9952 on Wednesday.
The Swiss franc remained at 0.8498 per dollar ahead of the central bank’s policy announcement on Thursday. It had been widely expected to be a third straight quarter-percentage-point rate cut.
