Dollar slides on expectations of less hawkish Fed, euro at 1-month high

Dollar slides on expectations of less hawkish Fed, euro at 1-month high
Dollar slides on expectations of less hawkish Fed, euro at 1-month high
© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Alun John and Kevin Buckland

LONDON/TOKYO (Reuters) – The euro climbed back above parity against the dollar for the first time in a month on Wednesday after poor U.S. economic data reinforced speculation that the Federal Reserve will slow its interest rate hikes, sending the greenback tumbling.

The European common currency rose 0.66% to $1.0042, the highest since Sept. 20. Sterling rose 1.05% to $1.1592, its best since Sept. 14, and the dollar also fell against the Japanese yen, sliding 0.6% to 146.9.

“It’s a continuation of the (dollar) sell-off that we’ve seen since the end of last week. Markets are anticipating a potential slowdown in the pace of Fed hiking,” said Lee Hardman a currency analyst at MUFG.

“We don’t think that’s going to happen at the next meeting in November, but certainly by December there’s a higher probability they could step down the pace to 50 basis points rather than the 75 basis points we’ve seen recently.”

The aggressive pace of Fed tightening has sent the dollar higher.

Fed officials have begun sounding out their desire to slow down the pace of increases soon, according to a Wall Street Journal report on Friday that caused markets to reprice.

This was reinforced by data overnight showing that U.S. home prices sank in August as surging mortgage rates sapped demand, in the latest sign that Fed rate increases are already working to slow the world’s biggest economy.

Traders and economists predict another 75 basis point increase next Wednesday, but there is a growing view that it will slow to half a point in December.

The benchmark continued its descent from last week’s multi-year high of 4.338%, and was last down seven basis points at 4.038%.

The Canadian dollar also firmed to 1.352 per U.S. dollar, its strongest in three weeks, ahead of a Bank of Canada policy meeting at which analysts polled by Reuters expect a rate increase of 50 basis points.

That would be the second consecutive reduction in the size of rate rises after a 100 basis point move in July and 75 basis points last month.

The dollar was also weaker elsewhere, falling around 0.5% on both the Norwegian and Swedish crowns, and over 1% on China’s .

The Australian dollar

Cryptocurrencies extended their sharp rallies from the day before. was 1.2% higher at around $20,300, and ether was up 3.6% just above $1,500, building on Tuesday’s 8.7% surge.

Leave a Reply

Your email address will not be published. Required fields are marked *

New Brokers
2.8 rating
Buy & sell Crypto in minutes
3.0 rating
Note: Investing involves risks. You can lose your deposit. We advise you to only invest in financial products which match your knowledge and experience.
2.0 rating
Interactive Brokers attracts active traders with low per-share pricing, an advanced trading platform.
4.3 rating
eToro is the world’s leading social trading platform, with thousands of options for traders and investors.
Risk Warning: The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory or other services by AdonFinance. In addition, the content of the website offers no opinion with respect to the suitability of any security or any specific investment. Trading foreign exchange, stocks, cryptocurrencies and commodities is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against traders. Before any investment with any broker you need to carefully consider your targets, previous experience, and risk level. Forex trading can result in the loss of your money, as a result, you are expressly cautioned that you should never invest or trade with money that you cannot afford to lose. For the avoidance of doubt, AdonFinance's service provides Brokers reviews in the Financial market. AdonFinance, its subsidiaries, agents or affiliates will assume no responsibility whatsoever for your trading activity. © Copyright 2021 AdonFinance