Dollar eases amid non-hawkish Fed bets.starling farm

TOKYO: The safe haven US dollar softened against the rest of the world on Tuesday amid signs that the Federal Reserve’s (Fed) rate hike is already putting the brakes on the world’s largest economy. Meanwhile, risk sentiment has improved as Rishi Sunak seeks to become British Prime Minister.

The pound moved towards this month’s highs and the euro threatened to hit $0.99 for the first time since Oct. 6 ahead of Thursday’s European Central Bank (ECB) policy meeting.

The yen held firm on the strong side of 149 against the dollar after a second straight day of suspected Bank of Japan (BOJ) intervention over the weekend.

The fall in long-term government bond yields this week also helped support the Japanese yen, but the policy backdrop for the yen’s weakness is likely to ease significantly in the coming days. The Fed could raise rates by another 75 basis points next Wednesday.

The Dollar Index, which measures the currency against six major currencies, fell to 111.78, close to Friday’s low of 111.68, the lowest since Oct. 6.

The US dollar softened after last night’s S&P Flash PMI data showed US business activity contracted for the fourth month in a row in October.

Economists polled by Reuters expect the pace of rate hikes to slow to 50 basis points in December, in line with expectations in money markets.

“There is still a lot of good news for the dollar structurally, but it is currently in a choppy market with a flat reversion,” said Chris Weston, head of research at Pepperstone in Melbourne. Weston expects the dollar index to fall to 110 before resuming an uptrend that could test 115.

“I still think the dollar is the most beautiful currency to hold in the G10.”

US 10-year Treasury yields retreated to 4.217% in Tokyo after reaching a multi-year peak at 4.338% over the weekend.

The dollar fell to 149.00 yen from Friday’s 32-year high of 151.94, apparently triggered by a series of BoJ interventions. The dollar fell to 144.55 on Friday and 145.28 on Monday.

Unlike September’s intervention, the first yen-buying by Japanese authorities since 1998, the finance ministry declined to comment on whether it had ordered intervention.

“As a general rule, policymakers have the greatest impact on markets when they are transparent about their actions and objectives, which is why they disallow intervention,” said Joseph Capruso, currency strategist at Commonwealth Bank Australia. It’s strange,” he wrote. client note.

“The refusal to confirm intervention may reflect a desire to keep traders speculating and keep the USD/JPY down. Whatever the tactic, weeks after the BOJ intervention ended. We expect USD/JPY to recover within the next few days.”

The pound is up 0.24% at $1.13105, heading towards the month’s high of $1.1493 since 5th October.

The euro rose 0.16% to $0.98875.

The ECB will raise interest rates by 75 basis points on Thursday in an attempt to tamp down ferocious inflation.

Elsewhere, China’s leader Xi Jinping’s choice of leadership team at the Communist Party Congress, which takes place twice every decade, has prompted fears that growth will be sacrificed for ideologically driven policies. The offshore Chinese yuan fell to an unprecedented 7.3650 to the dollar amid softness after growing concerns.