Gertrude Chavez-Dreyfus and Stefano Rebaudo
NEW YORK/MILAN (Reuters) – The U.S. dollar fell against the yen on Tuesday in a choppy session after Federal Reserve Chairman Christopher Waller confirmed rate hikes were unlikely at this stage as inflation appeared to be heading toward central level. The bank’s target is 2%.
Against other currencies, the dollar was largely flat ahead of U.S. Memorial Day next week, including the end of the month, which typically sparks a flurry of activity in the market.
In the absence of economic data this week, market participants are more attuned to comments from Fed officials.
“More recent economic data show that contractionary monetary policy is helping to cool aggregate demand, and inflation data for April suggests progress towards 2% has likely resumed,” Waller said in remarks prepared for broadcast in Peterson Institute for International Economics. .
“Central bankers should never say never, but the data shows inflation is not accelerating and I believe further rate hikes are probably not necessary.”
Fed Chairman Jerome Powell, in his press briefing after the Fed kept rates steady earlier this month, also ruled out the possibility of a rate hike.
“This rules out the tail risk scenario where the Fed is still thinking about a hike because they are effectively questioning their assumption that rates are restrictive enough,” said Vishal Khanduja, co-head of Broad Markets fixed income at Morgan Stanley. Investment management.
“Fed Chairman Powell and other Fed members have done a good job of communicating rate hikes very clearly. In our opinion, this is more news that moves the market, rather than being priced into the rate cut.”
The dollar was down 0.1% against the yen in morning trading at 156.065 yen. The currency pair typically tracks expectations for interest rate movements, with prices falling instead of rising putting pressure on the dollar by lowering yields on U.S. debt assets such as Treasuries.
However, fears of intervention from Japanese authorities are keeping traders from pushing the yen to new lows. On April 29, the yen fell to more than 160 to the dollar, its lowest level in 34 years.
PROFIT OF CRYPTOCURRENCY
Atlanta Fed Chairman Raphael Bostic also spoke Tuesday and warned against cutting rates too quickly. The Fed, he said, needs to be careful in approving its first rate cut to make sure it doesn’t affect pent-up spending by businesses and households or put the central bank in a position where inflation starts to spike.
Several officials on Monday also called for continued caution, even after data last week showed pressure on consumer prices easing in April.
“The Fed’s speeches are driving the market – and they still haven’t said anything that traders weren’t expecting, keeping the US dollar steady,” said Helen Given, a currency trader at Monex USA in Washington.
“Barring a surprise in the FOMC (Federal Open Market Committee) meeting minutes tomorrow afternoon, it’s likely this week could remain fairly quiet.”
The pair changed slightly and amounted to 104.56.
The euro was also unchanged at $1.0861.
US interest rate futures on Tuesday were priced at about 43 basis points (bps) of Fed rate cuts in 2024, implying one cut of 25 bps. and more than a 70% chance of a second move by December, according to betting probability app LSEG.
In the eurozone, futures are betting on a 63 bps ECB rate cut. in 2024 from about 73 bps. in the middle of May.
Investors are also awaiting data on Thursday from the European Central Bank’s payroll tracker and the eurozone purchasing managers’ index, which could provide further clues about the eurozone’s monetary cycle.
In cryptocurrencies, Ethereum posted its biggest two-day gain in nearly two years and Bitcoin neared a record high on speculation about the results of bids for US spot exchange-traded funds that would track the world’s second-largest cryptocurrency.
Ether jumped 7.8%% to $3,773 after hitting $3,833.70, its highest level since mid-March. It rose nearly 14% in the previous session, its biggest daily percentage gain since November 2022.
broke above the $70,000 level and was last trading 1% higher at $70,241. It reached its all-time high of $73,803.25 in March.
On the data front, the focus will now be on the Personal Consumer Expenditures (PCE) price index report—the Fed’s preferred inflation gauge—due May 31.
Against the Canadian dollar, the US currency rose 0.1% to C$1.3643. Data showed Canada’s annual inflation rate slowed to a three-year low of 2.7% in April, in line with estimates, while key measures continued to ease. These figures raised bets on a Bank of Canada cut in June.
Currency
bet
Prices
May 21
03:21
evening GMT
RIC Description Latest US YTD Percentage High Low
when closing, change the Bid
Previous
Session
Dollar 104.57 104.6 -0.02% 3.16% 104.76 104.
index 47
Euro/doll 1.0859 1.0857 0.02% -1.62% $1.0875 $1.0
843
Dollar/Ye 156.08 156.18 -0.06% 10.66% 156.555 155.
No. 855
Euro/Yen 1.0859 169.65 -0.09% 8.91% 169.93 169.
23
Dollar/Swiss 0.9102 0.9108 -0.07% 8.15% 0.9117 0.90
issue 88
Sterling/ 1.2721 1.2706 0.12% -0.02% $1.2727 $1.0
Dollar 843
Dollar/California 1.3642 1.3624 0.14% 2.92% 1.3675 1.36
Nadian 15
Aussie/Do 0.667 0.6668 0.06% -2.15% $0.6679 $0.6
647 GEL
Euro/Switzerland 0.9882 0.9884 -0.02% 6.42% 0.9893 0.98
from 73
Euro/sterle 0.8533 0.8543 -0.12% -1.56% 0.8551 0.85
Lin 34
New Zealand 0.6097 0.6106 -0.13% -3.5% $0.6111 0.60
Dollar/Up to 88
Lar
Dollar/No 10.6648 10.6987 -0.32% 5.23% 10.7307 10.6
highway 415
Euro/Norway 11.581 11.6153 -0.3% 3.18% 11.6471 11.5
yes 526
USD/CHF 10.691 10.6884 0.02% 6.2% 10.7088 10.6
Eden 465
Euro/Sweden 11.61 11.5978 0.11% 4.36% 11.6235 11.5
at 715