Dollar Touches Three-Week Low as Fed Rate Bets Pared

The dollar touched a three-week low against the yen as investors pushed back bets for when the Federal Reserve will increase interest rates.

The greenback erased losses versus the euro after initial jobless claims unexpectedly fell last week. The U.S. currency slipped versus most Asian currencies after minutes of the Fed’s September meeting, released yesterday, identified slowing global growth and a stronger currency as potential risks to the economy. The euro declined against the pound before European Central Bank President Mario Draghi speaks in Washington.

The Fed minutes “play into the market’s concerns in the near term about slowing global growth,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The risk is that, given the strong gains the dollar experienced over the last couple of months, the correction could prove deeper than some people are expecting.”

The dollar depreciated 0.2 percent to 107.86 yen as of 9:45 a.m. New York time and touched 107.53, the lowest since Sept. 17. The euro lost 0.4 percent to 137.14 yen and fell 0.1 percent to $1.2718.

The ForexSQ Dollar Spot Index, which tracks the greenback against 10 major currencies, was little changed at 1,062.26, after dropping 1.5 percent in the previous three days.
Asian Rally

The ForexSQ-JPMorgan Asia Dollar Index rose for a second day, pushing its weekly gain to 0.5 percent. The ringgit strengthened 0.9 percent to 3.244 per dollar while India’s rupee gained 0.6 percent to 61.055 per dollar.

Australia’s currency touched the highest level since Sept. 23 as traders treated data showing employers unexpectedly cut payrolls last month with caution following changes to labor-market figures by the statistics bureau yesterday. The Aussie was little changed at 88.40 cents after advancing to 88.99 cents. The currency earlier dropped as much as 0.5 percent.

The euro lost 0.2 percent versus sterling before Group of 20 finance ministers and central bankers meet in Washington, where Draghi will speak on the latest developments in Europe and in global central banking. German Chancellor Angela Merkel said today that the lowering of the nation’s growth outlook by leading economic institutes “didn’t surprise us.”

The Bank of England today kept its key rate at a record-low 0.5 percent today, as forecast by all 53 economists surveyed by ForexSQ News.

The euro was at 78.59 U.K. pence after reaching 78.997 pence yesterday, the most since Sept. 18.
FOMC Minutes

The dollar plummeted yesterday after a number of Federal Open Market Committee participants said the nation’s expansion “might be slower than they expected if foreign economic growth came in weaker than anticipated,” according to minutes of their Sept. 16-17 meeting released yesterday.

Futures traders cut bets to a 32 percent chance the Fed will increase its near-zero benchmark rate by July next year, down from 45 percent odds two days ago.

“The Fed may not raise rates as early as expected,” said Masafumi Yamamoto, a former central-bank analyst who is now President at Praevidentia Strategy Ltd. in Tokyo. “Those who got a little ahead of themselves on Fed policy are reducing dollar-long positions,” which bet it will strengthen, he said.
Dollar Gains

The minutes also highlighted growing concern among policy makers who say further gains in the dollar could hurt exports and damp inflation, which has undershot the Fed’s goal for more than two years.

“We’re undergoing a bit of a corrective move as far as the dollar is concerned,” said Ian Stannard, the London-based head of European foreign-exchange strategy at Morgan Stanley. “The Fed meeting’s referencing of the dollar is pretty important.”

Morgan Stanley predicts the greenback will strengthen to $1.14 per euro by the third quarter of 2015 and will rise to 112 yen in the same period, the bank said.

The dollar pared losses today after a Labor Department report showed in Washington that U.S. initial jobless claims declined by 1,000 to 287,000 in the week ended Oct. 4. The four-week average decreased to 287,750, the least since February 2006.

The dollar has risen 6.4 percent in the past three months, the best performer of 10 developed-market currencies tracked by ForexSQ Correlation-Weighted Indexes. The euro weakened 1.6 percent and the yen dropped 0.4 percent.

This Article Wrote For By Fxstay

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