Wednesday, October 27

Dollar creeps higher as Fed’s taper looms


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SINGAPORE — The dollar began the week

firmly on Monday with investors in a cautious mood ahead of

several central bank meetings, headlined by the Federal Reserve,

while looming catastrophe at indebted developer China Evergrande

added to markets’ fragility.

In thin trade, owing to holidays in Japan and China, the

euro nursed losses from its weakest week in a month,

slipping slightly to touch a four-week low of $1.1721.

Sterling and the Australian and New Zealand dollars were

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also pressured toward new troughs. The kiwi, at

$0.7024, and sterling, at $1.3722, made three week lows

as did the Aussie which fell 0.1% to $0.7253.

“The US dollar is having a bit of a rebound,” said Westpac

analyst Imre Speizer, drawing support, he added, both from an

expectation of imminent asset purchase reductions from the Fed

and from caution as equity markets begin to get the wobbles.

“Everyone is eying the Fed, waiting for a tapering signal.”

The US dollar index rose very slightly to a

month-high 93.263. The yen held at 110.01 per dollar.

The week brings central banks in Japan, the UK, Switzerland,

Sweden, Norway, Indonesia, the Philippines, Taiwan, Brazil,

South Africa, Turkey and Hungary as well as elections in Canada

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and Germany — though traders are mostly focused on the Fed.

The Fed concludes a two-day meeting on Wednesday and

markets’ consensus is that it will stick with broad plans to

begin tapering this year but will hold off providing details or

a timeline for a at least a month.

Creeping US yields, however, which at the 10-year tenor

rose for a fourth straight week last week point to

risks of a hawkish surprise or a shift in projections to show

hikes as soon a 2022, both of which could support the dollar.

It would only take two Fed members to change their minds for

the “dot plot” of median projections to reflect hikes next year,

said Marshall Gittler of brokerage BDSwiss.

“So it’s quite possible that they go from forecasting no

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rate rises next year to at least one,” he said.

“Similarly, they are now forecasting two hikes in 2023 –

that could easily go to three as well.”

Among the other major central banks the Bank of England is

expected to leave policy settings unchanged, but traders see

potential for gains in the currency if the bank adopts a hawkish

tone or more members being calling for asset purchase tapering.

There is no expectation of policy shifts at the resolutely

dovish Bank of Japan on Wednesday, but a day later Norway’s

Norges Bank is expected to becomes the first G10 central bank to

lift rates.

The Norwegian crown had slipped with oil prices and

the rising dollar on Friday and last sat at a

one-and-a-half-week low of 8.7154 per dollar.

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The oil-sensitive Canadian dollar was also on the

back foot ahead of an election on Monday where polling points to

an advantage for incumbent Prime Minister Justin Trudeau but a

likelihood he remains leader of a minority government.

In China, onshore stock and currency markets were closed on

Monday but the yuan was under pressure offshore as the debt

crisis engulfing Evergrande added to discomfort over

China’s slowing economy and regulatory crackdowns.

The yuan fell about 0.1% and through its 200-day

moving average to 6.4770 per dollar. Evergrande has a bond

interest payment of $83.5 million due on Thursday.

================================================== ======

Currency bid prices at 0116 GMT

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

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Previous Change

Session

Euro/Dollar $1.1721 $1.1726 -0.04% -4.07% +1.1734 +1.1721

Dollar/Yen 109.9850 109.9500 +0.07% +6.53% +110.0300 +110.0300

Euro/Yen

Dollar/Swiss 0.9323 0.9325 -0.03% +5.37% +0.9325 +0.9321

Sterling/Dollar 1.3719 1.3727 -0.02% +0.45% +1.3740 +1.3722

Dollar/Canadian 1.2774 1.2768 +0.05% +0.32% +1.2778 +1.2762

Aussie/Dollar 0.7253 0.7263 -0.14% -5.71% +0.7268 +0.7253

NZ 0.7028 0.7035 -0.07% -2.10% +0.7042 +0.7024

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; Editing by Sam Holmes)

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