FOREX-Dollar declines with Fed policy decision in sight
* Chart: Global exchange rates https://tmsnrt.rs/2RBWI5E (add analyst comment, update prices)
By John McCrank
NEW YORK, Nov. 1 (Reuters) – The dollar eased against its main rivals on Monday, after posting its biggest daily rise in more than four months in the previous session, as traders position ahead of the highly anticipated meeting of the US Federal Reserve this week. .
Monetary policy in the United States, Australia and Britain is the focus of concern, with the Fed largely expected to announce a cut in stimulus measures, a factor that has fueled the greenback’s rise in recent weeks.
The dollar index, which measures the US currency against six rivals, fell 0.321% to 93.894.
“It’s grown so much in the last few days, I think it’s just a little pre-positioning ahead of the FOMC just in case they stay relatively accommodating,” Boris Schlossberg, Managing Director of FX at BK Asset Management, said of the decline of the dollar.
On Friday, the greenback hit its highest level since Oct. 13, up 0.8% in its biggest single-day move since mid-June, thanks to a 4.4% jump from the government index of basic personal consumption expenditure – the Fed’s preferred index measures inflation.
“I still think there’s a good chance they’re trying to minimize inflation and stick to the transitional message as much as possible because I don’t think they really want to create really tough conditions for it. the moment, “Schlossberg said of the Fed’s policy announcement, due Wednesday.
The acceleration in inflation data has prompted some investment banks such as Goldman Sachs to anticipate a Fed rate hike as early as July 2022, compared to the third quarter of 2023 previously.
“You made a move on Friday based on the PCE and you have a little bit of a step back here,” said Joseph Trevisani, senior analyst at FXStreet.com. “No one is quite sure what the Fed is going to do.”
Money markets attribute a 50% chance of a 25 basis point rate hike by the Fed by next June, up from 15% a month earlier, according to CME futures data.
The euro rose 0.037% to $ 1.16045, after giving up most of its European Central Bank policy gains on Friday when it touched $ 1.1535, its lowest since October 13.
Hedge fund manager Stephen Jen of Eurizon SLJ Capital, in a note to clients, said currency markets appeared too aggressive towards the ECB and too accommodating towards the Fed.
“With a large excess of long positions on the euro within the real money community, I think the euro will remain vulnerable in the months and quarters to come against the dollar,” he said. declared.
The Australian dollar slipped 0.01% to $ 0.7518, after falling from its nearly four-month high of $ 0.75555 reached last week, ahead of the Reserve Bank of Australia’s policy move Tuesday.
The pound fell to its lowest in more than two weeks against the dollar, under pressure from uncertainty over Bank of England policy and a post-Brexit escalation with France over rights to peach.
Most expect the Bank of England to raise rates by 15 basis points to 0.25% on Thursday, although a split vote is likely and some believe the bank could hold back the fire, settling for ‘a hawkish signal.
(Reporting by John McCrank in New York and Saikat Chatterjee in London; editing by Rashmi Aich, Andrew Heavens and Barbara Lewis)