Authors: Gertrude Chavez-Dreyfuss and PJ Huffstutter
NEW YORK (Reuters) – The U.S. dollar hit a 10-week high in feeble conditions on Monday, extending a weeklong rally that began with data showing a moderately slowing economy that coincided with bets on moderate interest rate cuts by the Federal Reserve.
Volume was delicate and several markets, including Japan and Canada, were closed on Monday. The US bond market is closed for Indigenous Peoples’ Day.
The dollar rose against the Chinese yuan after China’s weekend stimulus announcements disappointed investors.
The dollar’s index against six major currencies rose to 103.36, the highest level since August 8. It was last up 0.2% at 103.23, while the euro fell to a 10-week low below $1.09 and was last down 0.3% at $1.0902.
The European Central Bank is expected to cut interest rates this week, but the Fed remains the market’s focus. According to the U.S. interest rate futures market, there is an 87% chance the Fed will cut the interest rate by 25 basis points at its November meeting and a 13% chance it will hold and maintain the federal funds rate at a target of between 4.75% and 5 %. according to LSEG estimates.
About four weeks ago, the Fed cut interest rates by an aggressive 50 basis points.
For the rest of the year, the futures market expects interest rate cuts of about 45 basis points and another 98.5 basis points in 2025. This is significantly smaller compared to the roughly 200 basis point rate cuts that the market was suggesting ahead of the September Fed meeting and the blockbuster US nonfarm payrolls report, which resets expectations for monetary easing to a much shallower cycle than previously thought.
Expectations of smaller interest rate cuts have supported the dollar over the past few weeks, but analysts say the correction is likely to come to an end.
“I suspect that (the interest rate adjustment) is almost over and we are back on a downward trend. But I think there’s one more sigh left,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“We could trigger a stop at $1.09 in euros or $1.30 in sterling. But I’m looking ahead and the next U.S. employment numbers will be around 120,000. That’s going to be a weak number.”
Minneapolis Fed President Neel Kashkari on Monday strengthened market sentiment about easing the policy of the US central bank.
“At this point, it seems likely that further moderate reductions in our interest rates in the coming quarters will be appropriate to achieve both sides of our mandate,” Kashkari said in a speech at the Central Bank of the Argentine Republic conference, referring to the Fed’s mission to keep unemployment and inflation down at a low level.
ECB MEETING
In the euro zone, the euro fell for the 11th time in 12 sessions as investors began to almost certainly price in a 25 basis point rate cut by the ECB at Thursday’s meeting after data showed deteriorating activity in the euro zone.
Current indicators point to continued weakness in the German economy in the last quarter, the Economy Ministry said in its monthly report on Monday.
Meanwhile, ratings agency Fitch changed France’s outlook from “negative” to “stable” on Friday, citing tightening fiscal policy and political risks.
The pound fell 0.1% against the dollar to $1.3054.
Against the yen
Next on the market’s radar will be US retail sales and jobless claims data and the ECB’s policy review, which will be released on Thursday.
In Asia, trade was dominated by Beijing’s announcement of fiscal stimulus. China fell 0.3% against the dollar and settled last at 7.0906.
Without quantifying the proposed fiscal stimulus, Finance Minister Lan Fo’an told a news conference that more “countercyclical measures” would be introduced this year.
“The announcement of China’s weekend stimulus package was disappointing as policymakers showed greater commitment to supporting growth but did not deliver the hard numbers that markets were hoping for,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
The dollar has fallen almost 1% since September 24, when the People’s Bank of China launched China’s most aggressive stimulus measures since the pandemic.
On the digital currency front, bitcoin rose to a two-week high and was last up 4.6% to $65,881. Ether rose 7% to $2,629, also hitting a two-week high earlier in the session.
Currency
offer
prices per hour
14
October
07:07
afternoon GMT
Description RIC Last US Pct YTD Pct High Low
to Close Change offer Offer
Previous
Session
Dollar 103.25 103.04 0.21% 1.85% 103.36 102.
index 96
Euro/Dollar 1.09 1.0936 -0.32% -1.25% 1.0937 USD 1.0
it’s 888
Dollar/Ye 149.79 149.17 0.38% 6.16% 149.945 149.
No. 16
Euro/Yen 1.09 163.09 0.12% 4.92% 163.6 162.
9
Dollar/Sw 0.863 0.8574 0.68% 2.57% 0.864 0.85
it’s 8
Sterling sterling/ 1.3052 1.3067 -0.09% 2.59% 1.307 $1.3
Dollar 031
Dollar/Katwa 1.3796 1.3763 0.27% 4.11% 1.3805 1.37
nadian 64
Australian/Up to 0.6719 0.6751 -0.46% -1.44% 0.6793 USD 0.6
703
Euro/Swiss 0.9407 0.9374 0.35% 1.3% 0.9427 0.93
71
Euro/Christmas 0.835 0.8368 -0.22% -3.67% 0.8373 0.83
ling 49
New Zealand 0.6087 0.6109 -0.33% -3.65% $0.6102 0.60
Dollar/Up to 71
ll
Dollar/No 10.7931 10.6844 1.02% 6.49% 10.7985 10.7
road 123
Euro/Norway 11.7654 11.6887 0.66% 4.82% 11.781 11.7
it’s 044
Dollar/Sw 10.4303 10.3569 0.71% 3.61% 10.4417 10.3
Eden 77
Euro/Sweden 11.369 11.3313 0.33% 2.2% 11.3905 11.3
in 391
