By Brigid Riley
(Reuters) – The dollar was at its lowest level in more than a year against other currencies on Wednesday, while the British pound fell just below multi-year highs as markets focused on news about the scale of a widely expected U.S. interest rate cut next month.
Cryptocurrency Bitcoin took center stage in Asia, losing more than 4% after breaking through support at around $60,000.
The Australian dollar rose to an eight-month high after data showed domestic inflation fell to a four-month low in July, but overall progress in curbing price increases disappointed. It was last at $0.06793.
“The Reserve Bank of Australia is unlikely to change its stance at its September meeting, which could further strengthen the AUD in the near term, alongside the cyclical weakness of the US dollar and the steady momentum of global economic growth,” said Charu Chanana, head of FX strategy at Saxo.
Elsewhere, overall currency market moves were muted as investors awaited novel guidance on the health of the world’s largest economy.
Investors are unanimous in betting that the Federal Reserve will begin cutting interest rates next month following Chairman Jerome Powell’s dovish stance last week, with the debate now focusing on whether it will be a massive 50 basis point cut.
According to CME Group’s (NASDAQ:) FedWatch tool, current prices indicate a 36% chance of a deeper decline, up from 29% a week ago.
Markets, which had been expecting a 25 basis point rate cut next month, are now predicting just over 100 basis points of easing by the end of the year.
The preliminary estimate of US gross domestic product for the second quarter is due out later this week, as well as the core consumer expenditures (PCE) index, the Fed’s preferred measure of inflation.
But with the focus now shifting from inflation to the health of the economy, the significance of this week’s PCE data is “debatable,” said Matt Simpson, senior market analyst at City Index.
“It will take a big surprise to dash expectations of multiple Fed rate cuts.”
The index, which measures the value of the U.S. dollar against a basket of currencies, was last up 0.2% at 100.78, holding above a 13-month low of 100.51 set in the previous session.
The dollar has lost 3.4% this month, marking its biggest monthly decline since November 2022.
However, with markets having been pricing in a September-only easing for several weeks now, the dollar’s downside momentum appears to be fading, with support emerging at around 100.18/30, Simpson said.
The pound weakened 0.14% to $1.3243 after hitting its highest level since March 2022 against the U.S. dollar at $1.3269 on Tuesday.
The euro fell 0.24% to $1.1156, but was just off a 13-month peak reached earlier in the week.
The yen weakened against the U.S. dollar, hitting a three-week high of 143.45 on Monday, and was last down 0.23% at 144.33 per dollar.
The New Zealand dollar fell 0.1% to $0.6246. In cryptocurrencies, bitcoin was last down 4.1% at $59,329 after falling more than 6% earlier in the session.
