© Reuters. FILE PHOTO: Japanese yen and U.S. dollar banknotes are shown in this March 10, 2023 photo illustration. REUTERS/Dado Ruvic/Illustration/Archive photo
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The U.S. dollar fell against most currencies on Wednesday as investors recognized that Federal Reserve Chairman Jerome Powell’s statements after the two-day policy meeting suggested the U.S. central bank would continue with the interest rate hike could be ready.
As expected, the Federal Reserve’s policy-making Federal Open Market Committee (FOMC) left interest rates in the 5.25% to 5.50% range, where they have been since July. The Fed did not rule out another rate hike, acknowledging the economy’s unexpected resilience despite aggressive tightening measures initiated more than a year ago.
But Powell’s comments in his press conference were full of mixed messages, leaving investors doubtful that the Fed will raise interest rates again.
Powell said the Fed still has a long way to go to get inflation to 2%, citing resilience in economic data and labor demand that could justify further rate hikes. However, he noted that financial conditions had worsened significantly and cited numerous risks.
“The most notable takeaway from his comments was that the risks to whether policy is ‘sufficiently restrictive’ are much more balanced,” said Charlie Ripley, senior investment strategist at Allianz (ETR:) Investment Management in Minneapolis, by email. Mail.
“This signals that while there is potential risk for the Fed to do more, the hurdle to raising rates has become higher and we are clearly seeing this reflected in two consecutive meetings of no Fed policy action .”
The value, which initially rose after the Fed’s statement, was recently slightly negative at 106.64. It has moved sideways since hitting a near one-year high of 107.34 in early October, reflecting a sharp rise in U.S. bond yields on strong economic growth.
The Fed’s latest statement said that with employment growth still “strong” and inflation still “elevated,” the central bank continues to consider “the extent of additional monetary policy tightening that may be appropriate to bring inflation back down over time.” attributable to 2%”.
However, U.S. interest rate futures have increased bets that the Fed is finished raising its key interest rate and will begin cutting rates by June. Bets on a rate hike in December and January were reduced from 28% and 39% to 19% and 30%, respectively, late Tuesday.
“Powell had several opportunities to threaten another rate hike but missed most of them,” U.S. economist Tom Simons wrote in a research note after the Fed meeting.
“The responses to press questions were consistent with the high level of uncertainty about the outlook and how much delay there is in the pipeline compared to previous steps.”
Against the yen, the dollar fell 0.6% to 150.89. The currency pair typically follows moves in the two-year U.S. Treasury yield, which fell 11.5 basis points to 4.958.
The battered yen also gained, rising from a one-year low against the U.S. dollar and a 15-year low against the euro on threats of intervention from Japanese authorities, with Japan’s top currency diplomat Masato making stronger-than-usual remarks in Kanda .
Wednesday’s data also showed weakening momentum for the world’s largest economy, putting the dollar on the defensive for parts of the session.
U.S. manufacturing contracted sharply in October after improving in previous months as new orders and employment fell.
U.S. private payroll data rose less than expected in October and wage growth weakened. Private payrolls increased by 113,000 jobs last month after increasing by 89,000 in September, according to the ADP National Employment Report.
In other currencies, the euro was last unchanged at 1.0570 US dollars.
The dollar fell 0.3% against the Swiss franc to 0.9079 francs.
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Currency bid prices at 4:38 p.m. (2038 GMT)
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
Dollar Index 106.6400 106.6700 -0.01% 3.044% +107.1100 +106.6100
Euro/Dollar $1.0570 $1.0576 -0.05% -1.35% + $1.0581 + $1.0517
Dollar/Yen 150.8950 151.7400 -0.55% +15.09% +151.6750 +150.6700
Euro/Yen 159.50 160.41 -0.57% +13.68% +160.4300 +159.0800
Dollar/Swiss 0.9078 0.9105 -0.27% -1.80% +0.9112 +0.9071
Sterling/Dollar $1.2147 $1.2154 -0.07% +0.43% +$1.2164 +$1.2096
Dollar/Canadian 1.3863 1.3875 -0.06% +2.34% +1.3899 +1.3843
Aussie/Dollar $0.6391 $0.6338 +0.86% -6.23% +$0.6399 +$0.6319
Euro/Switzerland 0.9595 0.9627 -0.33% -3.03% +0.9628 +0.9569
Euro/Sterling 0.8699 0.8702 -0.03% -1.64% +0.8712 +0.8684
NZ $0.5847 $0.5826 +0.37% -7.91% +$0.5858 +$0.5790
Dollar/Norway 11.1780 11.1820 +0.00% +13.94% +11.2450 +11.1640
Euro/Norway 11.8215 11.8189 +0.02% +12.59% +11.8427 +11.7895
Dollar/Sweden 11.1745 11.1683 -0.01% +7.37% +11.2412 +11.1540
Euro/Sweden 11.8113 11.8126 -0.01% +5.93% +11.8365 +11.7877
Source : www.investing.com