By Tom Westbrook
SINGAPORE, Jan 31 (Reuters) - The dollar headed for its
biggest monthly gain since September and the yen for its
sharpest drop in nearly a year on Wednesday, as traders waited
on a U.S. rates decision to round out January.
The dollar has gained 2% against a basket of major
currencies this month as markets dialled back
expectations on the speed and scale of rate cuts in the face of
strong U.S. economic data and pushback from central bankers.
In Japan, meanwhile, tepid wage growth and cooling inflation
dulled expectations for hikes, driving the yen down more than
4% on the dollar in January, its largest fall since Feb. 2023.
The dollar was steady at $1.0844 per euro and a
touch weaker at 147.23 yen early in the Asia day, with
a summary showing discussion of ending negative interest rates
at the Bank of Japan's January meeting helping support the yen.
The dollar index last sat at 103.36. Sterling
hovered at $1.2698.
Later, the Federal Reserve is expected to hold U.S. interest
rates steady but flag cuts are coming by dropping language
indicating it is weighing further hikes.
Interest rate futures price a roughly 43% chance of a Fed
rate cut in March, down from 73% at the start of the year.
"The market reaction to the (Fed) meeting and its spillover
onto most asset markets is likely to be largely captured by the
impact on the probability of a rate cut at the March meeting,"
said Deutsche Bank's chief international strategist Alan Ruskin.
The pricing tends to influence the euro/dollar rate, he
noted, with a 50-50 probability consistent with the euro at
$1.087. "A 100% probability of a rate cut would point to
euro/dollar at $1.1080, while a rate cut that is fully ruled out
for March would point the way to euro/dollar at $1.0660," he
said.
Ahead of the Fed, purchasing managers index surveys are due
in China and European inflation figures are expected. Australian
inflation came in marginally below economist forecasts,
reinforcing bets the central bank is done hiking.
The Aussie slipped 0.2% to $0.6588. The New Zealand
dollar was steady at $0.6133.
Expectations of interest rate cuts in China have driven a
strong rally in the bond market this month while the yuan has
been squeezed by flight from China's crumbling equity markets.
The Chinese currency was steady at 7.1887 in
offshore trade on Wednesday, down 0.9% for the month.
========================================================
Currency bid prices at 0037 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar
$1.0846 $1.0845 +0.00% -1.74% +1.0847 +1.0843
Dollar/Yen
147.3650 147.6100 -0.16% +0.00% +147.5500 +147.2050
Euro/Yen 159.82 160.07 -0.16% +2.71% +160.0700 +159.6500
Dollar/Swiss
0.8618 0.8619 -0.01% +2.40% +0.8619 +0.8618
Sterling/Dollar
1.2695 1.2701 -0.04% -0.24% +1.2700 +1.2695
Dollar/Canadian
1.3399 1.3398 +0.02% +0.00% +1.3402 +1.3395
Aussie/Dollar
0.6587 0.6603 -0.23% -3.38% +0.6603 +0.6583
NZ
Dollar/Dollar 0.6132 0.6136 -0.07% -2.96% +0.6136 +0.6124
All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook. Editing by Sam Holmes.)
Dollar eyes monthly gain as markets look to Fed
January 31, 2024 at 06:18 am IST
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