Monday, October 25

Dollar firm ahead of payrolls; kiwi shrugs off rate hike

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SINGAPORE — The dollar inched higher in

choppy trade on Wednesday amid heightened nerves about the

global growth outlook and as traders awaited US jobs data for

a clue on the timing of Federal Reserve policy tightening.

The Reserve Bank of New Zealand lifted its official cash

rate for the first time in seven years, but the well-telegraphed

hike was expected and the New Zealand dollar barely budged.

The kiwi was last 0.3% weaker at $0.6931 and the

greenback posted similar gains elsewhere.


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The euro was pinned below $1.16 and last bought

$1.1590, scarcely higher than the 14-month low of $1.1563 it

struck last week. The yen eased to a one-week low of

111.64 per dollar and was within range of the 18-month trough of

112.08 that it visited last Thursday.

The Australian dollar weakened 0.3% to $0.7267.

The greenback has won support as investors brace for the

Federal Reserve to begin tapering asset purchases this year and

lay the ground for an exit from pandemic-era interest rate

settings well before central banks in Europe and Japan.

“Interest rate differentials are starting to have more of an

influence on currencies than they have for quite some time,”

said Kim Mundy, analyst at the Commonwealth Bank of Australia in


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Sydney, as an era of suppressed super-low rates starts to end.

“Now that the Fed is starting to look to taper and look to

the exit, we think we might see a lift in market pricing for

rate hikes which will help to support the USD,” she added.

Fed funds futures markets are priced for rate hikes

to begin around November 2022, but anticipate rates topping out

at just over 1% through most of 2025 even though Fed members

project rates reaching 1.75% in 2024.

US non-farm payrolls data due on Friday is seen as crucial

to informing the Fed’s tone and timing, especially should the

figures wildly impress or disappoint. Private payrolls figures,

a sometimes unreliable guide, are due around 1215 GMT.

A large miss on market expectations for around 428,000 jobs


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to have been added in September could dampen expectations for

Friday’s broader figure, which is forecast at 473,000.


Elsewhere, commodity-linked currencies drew support from oil

prices, which have surged to three-year highs. The Canadian

dollar sits near a one-month peak and is close to

testing its 200-day moving average. Against the euro, the

Canadian dollar hit a 19-month high overnight.

Sterling has recovered some of last week’s sharp

selloff against the dollar but lost momentum through the Asia

session and it steadied at $1.3616 and held just below Tuesday’s

three-week peak on the euro.

In New Zealand a 25 basis point rate hike and familiar

hawkish tone from the central bank turned out to be a non-event


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for traders and did little to shift the currency or expectations

for further hikes in November and February.

“We’re on a path towards a series of rate hikes and the

market is well priced for that,” said Jason Wong, senior market

strategist at BNZ in Wellington. For the kiwi, that means “the

US dollar is in charge,” he said.

“That’s about the Fed, really, but globally what we’re

seeing in China and the energy crunch we’re seeing in Europe all

feeds into the mix and all makes markets nervous which adds to

support for the dollar.”

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Currency bid prices at 0220 GMT

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

Previous Change


Euro/Dollar $1.1591 $1.1597 -0.06% -5.14% +1.1600 +1.1588

Dollar/Yen 111.6050 111.4200 +0.12% +8.00% +111.6400 +111.5000


Dollar/Swiss 0.9288 0.9283 +0.07% +5.00% +0.9291 +0.9286

Sterling/Dollar 1.3620 1.3622 -0.02% -0.32% +1.3631 +1.3613

Dollar/Canadian 1.2591 1.2581 +0.09% -1.11% +1.2601 +1.2579

Aussie/Dollar 0.7270 0.7291 -0.28% -5.49% +0.7293 +0.7265

NZ 0.6935 0.6957 -0.32% -3.43% +0.6979 +0.6931


All spots

Tokyo spots

Europe spots


Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; Editing by Lincoln Feast & Simon




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