Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The U.S. dollar fell on Friday, taking a breather after five straight days of gains as risk appetite increased following another round of stimulus measures from China, which boosted global stocks led by Chinese shares.

Investors welcomed the launch of two financing programs by the Chinese government to lend a hand revive the stock market. As a result, Chinese stocks surged, also posting gains on other stock exchanges, including the Nasdaq and Nasdaq.

This also lifted rates and strengthened commodity currencies such as the Australian and Canadian dollars at the expense of the safe-haven dollar.

However, the index measuring the value of the U.S. unit against six major currencies was on track for a third weekly gain, currently up 0.6% this week. It is up about 2.7% so far this month, the biggest monthly gain since February 2023.

The index was last down 0.3% at 103.49, its biggest daily decline since delayed September.

“Today’s dollar weakening was largely due to China. Yesterday evening, China launched measures to support the stock market,” said Erik Bregar, director of currency and precious metals risk management at Silver Gold Bull in Toronto.

“This strengthened Chinese equities and broader risk sentiment and put pressure on the dollar/yuan, which in turn helped strengthen the euro/dollar. This started the dollar retreat.”

However, Friday’s U.S. dollar price action was likely momentary, Bregar said.

The biggest support for the dollar over the past few weeks has been a shift in Federal Reserve policy expectations to a more moderate easing phase, following a string of generally solid U.S. macroeconomic data. In September, the Fed cut benchmark rates by a massive 50 basis points (bps), prompting the then-interest rate futures market to price in another piercing move this year.

“Speculation that the Fed could make another move of a similar scale after September’s 50-basis-point rate cut has been dispelled by a series of data pointing to a resilient U.S. economy,” wrote Jane Foley, head of currency strategy at Rabobank in London.

“Instead, there have been voices that the FOMC may be willing to cut interest rates one more time before the end of the year.”

U.S. interest rate futures are pricing in a 95% chance the Fed will cut interest rates by 25 basis points next month and a 5% chance they will either pause them or keep the federal funds rate at its target of 4.75%-5%. LSEG estimates. A further 50 basis point reduction in interest rates was likely at one of these meetings.

The futures market also expects a cut of around 45 basis points in 2024 and additional cuts of 104 basis points next year.

Increasing odds for Trump

In afternoon trading, the dollar fell 0.5% against the yen to 149.51. However, it was up about 0.8% on the week as the Japanese currency broke above the 150 level on Thursday for the first time since early August. The US currency also rose 4.6% in October, the best monthly performance since February last year.

The dollar’s overall bullishness is being heightened by the growing prospect of former President Trump winning the November election as it is believed his proposed tariff and tax policies are likely to keep U.S. interest rates high.

The dollar fell against the Japanese currency after data showed U.S. housing starts fell 0.5% to 1.354 million in September, after rising a massive 7.8% to 1.361 million in August.

Meanwhile, the euro rose 0.3% against the dollar to $1.0865, rising for the first time in eight days and on track for its biggest daily gain since September 26. It is down 2.7% so far this month, in line with the pace of growth, the biggest monthly decline since May 2023.

It benefited from Chinese stimulus news on Friday after the European Central Bank cut euro zone interest rates by a quarter of a point on Thursday, in line with expectations. Traders are currently pricing in further interest rate cuts at the upcoming ECB meetings.

In Asia, it rose against the dollar, which fell 0.3% to 7.1177 yuan. The Australian dollar, often used as a floating proxy for the Chinese unit, rose 0.1% to $0.6704.

The pound was one of the strongest gains against the dollar, rising 0.2% to $1.3042 after UK data showed retail sales rose more than expected in September, giving investors some confidence in the strength of British economy.

On the cryptocurrency front, bitcoin has gained popularity with Trump’s rising prospects in the US presidential election as his administration is seen as taking a softer stance on cryptocurrency regulation. It was most recently up 2.8% at $68,781 and is up over 10% since October 10th.

Currency

offer

prices per hour

18

October

07:33

afternoon GMT

Description RIC Last US Pct YTD Pct High Low

to Close Change offer Offer

Previous

Session

Dollar 103.49 103.78 -0.27% 2.09% 103.78 103.

index 45

Euro/Dollar 1.0864 1.0831 0.31% -1.57% 1.0868 $1.0

it’s 826

Dollar/Ye 149.53 150.245 -0.48% 6.01% 150.18 149.

No. 445

Euro/Yen 1.0864 162.67 -0.13% 4.39% 162.84 162.

21

Dollar/Sw 0.8653 0.866 -0.06% 2.83% 0.8669 0.86

it’s 5

Sterling sterling/ 1.3042 1.3011 0.24% 2.49% 1.307 $1.3

Dollar 012

Dollar/Katwa 1.3807 1.3795 0.1% 4.17% 1.3815 1.37

nadian 85

Australian/Up to 0.6702 0.6696 0.1% -1.69% 0.6719 USD 0.6

695

Euro/Swiss 0.9401 0.938 0.22% 1.24% 0.9406 0.93

78

Euro/Christmas 0.8329 0.8323 0.07% -3.91% 0.8336 0.82

years 96

New Zealand 0.6066 0.6061 0.12% -3.97% $0.6079 0.60

Dollar/Up to 55

ll

Dollar/No 10.9248​ 10.912 0.12% 7.79% 10.9394 10.8

road 594

Euro/Norway 11.8702 11.8234 0.4% 5.76% 11.881 11.7

it’s 714

Dollar/Sw 10.5255 10.5372 -0.11% 4.55% 10.5493 ​​10.5

Eden 03

Euro/Sweden 11.4361 11.4144 0.19% 2.79% 11.4435 11.3

in 86