A downdraft in the US dollar took a pause on Thursday as investors settled in ahead of a slew of central bank meetings next week, where hawkish holds on interest rates are expected in Japan, the United States and Europe, Reuters reported from Singapore. The currency market remains long the dollar on the assumption that the AI boom keeps the US economy humming and that strong growth supports rates staying higher for longer, Reuters said.
Recent gains for sterling and the currencies of Canada, Australia and New Zealand — all of which have lately touched their highest levels against the dollar in several weeks — suggest dollar bets have been pared a bit, though moves on Thursday were slight, Reuters reported. Sterling, which hit a one-month high of $1.3409 earlier in the week on hotter-than-expected British inflation, held at $1.33955. The Australian dollar made a three-week top on Wednesday and was hanging on above 70 US cents at $0.7025, while expectations of a rate hike next week in New Zealand lifted the kiwi to a one-month high of $0.5709.
Australia is where the inflation pressure was stated most bluntly. Reserve Bank of Australia Deputy Governor Andrew Hauser said on Wednesday that the inflation outlook was looking 'materially worse' in part due to high oil prices, pushing up market bets that the next Australian hike could come as soon as next month, Reuters reported. Australian coverage of Hauser's Citi conference remarks added that oil prices are now roughly a third higher than the RBA assumed in its August projections, that the cash rate stands at 4.6 per cent after four increases this year, and that markets were pricing about a 40 per cent chance of a November hike.
The Bank of Canada is also expected to hike next week, and the Canadian dollar was supported near a one-month top of C$1.4032 per US dollar, Reuters reported. The euro and the yen settled into tight ranges, with the threat of intervention and the prospect of rate hikes holding Japan's currency around 158 to the dollar, while the euro — on a slide for about a month — has become a favoured channel for bets on a stronger dollar, as fiscal concerns in France and Europe's energy fragility attract short sellers, Reuters said.