FOREX-Dollar Approaches 1-Year High As Wage Bill Looms
Band Kevin Buckland
TOKYO, October 5 (Reuters) – The US dollar edged down to a one-year high against its major peers on Tuesday ahead of a key payroll report at the end of the week that could strengthen the case for the Federal Reserve to start phasing out measures stimulus from next month.
The greenback, a safe haven, was also supported by a massive sell-off of stocks that spilled from Wall Street to Asia.
The risk-sensitive Australian dollar has been one of the biggest declines as the Reserve Bank of Australia reiterates that it does not expect to hike interest rates until 2024 after keeping its policy stable , as expected.
The US dollar index = USD, which measures the currency against six rivals, rose 0.16% to 93.987, returning to Thursday’s high of 94.504, its highest since late September 2020.
The index had risen 2.8% since September 3, with traders scrambling to price the cut this year and possible rate hikes for 2022.
The dollar also benefited from safe haven demand amid concerns ranging from the risk of global stagflation to the deadlock on the US debt ceiling.
“The US dollar is only partially assessed for the Fed’s expected tightening program,” keeping the currency strong for a period of several weeks, Westpac strategists wrote in a client note.
Any decline in the dollar index should be limited to the 93.25-50 area, they said.
Friday’s data on non-farm wages is expected to show continued improvement in the labor market, with a forecast to create 488,000 jobs in September, according to a Reuters poll.
Meanwhile, an Asia-Pacific equity index .MIAP00000PUS slipped 0.92%, after falling 1.3% overnight for the S&P 500 .SPX.
The Australian AUD = D3 fell 0.34% to $ 0.7263, retreating further from Monday’s four-day high of $ 0.73045.
The New Zealand dollar NZD = D3 was down 0.34% to $ 0.6939, also retreating from a four-day peak at $ 0.6981. The Reserve Bank of New Zealand decided its policy on Wednesday, with markets forecasting a quarter point rate hike.
“The RBA’s tough stance weighs on the AUD,” Commonwealth Bank of Australia strategist Joseph Capurso wrote in a report.
For the RBNZ, “with markets already forecasting a cycle of rate hikes, the likelihood of a significant rise in the NZD is low,” he said.
The dollar gained 0.25% to 111.19 yen JPY = EBS, while the euro EUR = EBS slipped 0.21% to $ 1.15965.
Sterling GBP = D3 slipped 0.12% to $ 1.35,875.
While the consensus is in favor of further gains for the greenback – with speculators pushing net long bets to their highest since March 2020 – TD Securities warns that room for maneuver may be limited.
“As the short-term dollar bias is on the rise, we are reluctant to continue moving at these levels,” wrote Mark McCormick, TD’s global head of foreign exchange strategy, in a report.
“There is already a lot of bad global news valued in USD” and “the key for the markets in the coming weeks is to determine the extent of the risk premium already embedded in relation to how these factors occur” , McCormick said.
Global exchange rateshttps://tmsnrt.rs/2RBWI5E
(Reporting by Kevin Buckland Editing by Shri Navaratnam)
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