Hannah Lang and Greta Rosen Fondahn
NEW YORK/LONDON (Reuters) – The euro held steady against the dollar on Monday in skittish trading as investors awaited U.S. inflation data later in the week, while the Australian and New Zealand dollars strengthened after China has pledged an “appropriately loose” monetary policy next year.
Although markets consider a quarter-point cut in interest rates by the US Federal Reserve next week almost certain, investors are waiting for Wednesday’s data on US consumer prices.
“The rise in unemployment we saw in November only strengthens the case for a 25 basis point cut next Wednesday,” said Michael Brown, senior research strategist at Pepperstone.
“The Fed is now much more focused on the labor market than on inflation developments,” he added.
Friday’s data showed U.S. job growth accelerated in November, but a rise in the unemployment rate to 4.2% suggested a loosening labor market that should allow the Fed to cut interest rates again this month.
The euro gained against the dollar to $1.0576, having fallen as much as 0.3% earlier, while the dollar gained 0.78% against the yen to 151.200
The Australian dollar gained 1.15% against the Australian dollar and then rose 0.79% after China announced a change in monetary policy to boost growth.
The two currencies often serve as a proxy for the exchange rate, which has strengthened in the offshore market, leaving the dollar weakened by 0.27% at 7.2650.
China will adopt an “appropriately loose” monetary policy next year as part of measures to support economic growth, and implement a more proactive fiscal policy and intensify “unconventional” countercyclical adjustments, state media reported on Monday, citing a Politburo meeting.
“This is a market right now that wanted to hear good signals about global growth, so it kept its ears open,” said Adam Button, chief currency analyst at ForexLive. “We have already heard promises from China, but once again we have been given the benefit of the doubt.”
The dollar rose 0.35% against the South Korean won. Over the weekend, South Korean President Yoon Suk Yeol survived an impeachment vote in parliament following his short-lived attempt to impose martial law last week.
Mizuho (NYSE:) Banking strategist Vishnu Varathan pointed out that a number of geopolitical events, such as the weekend fall of Syrian President Bashar al-Assad, as well as trades related to the macroeconomy and President-elect Donald Trump, provide further incentive for markets to remain long. dollar .
“There is no incentive to short the dollar against any particular currency,” he said.
Last week’s headline, bitcoin, which hit six figures for the first time at a record price of $103,649, was last at $98,454.
CENTRAL BANK MEETINGS
The main events investors are watching this week include Thursday’s ECB policy meeting, which decided on a quarter-point cut, and China’s closed-door Central Economic Conference.
The Bank of Canada, the Swiss National Bank and the Reserve Bank of Australia are meeting this week, and the former two are expected to make deep interest rate cuts that could further widen yield differentials with their currencies.
The Canadian dollar was trading near a 4-1/2-year low on Monday as markets expect another too-big rate cut.
