Dollar struggles to hold Wednesday surge
ECB minutes eyed
Oil price rise increases stress on euro and sterling,
SYDNEY/LONDON, Oct 6 (Reuters) - The dollar wobbled
lower on Thursday, resuming its slide from early in the week, as
investors looked ahead to U.S. labour and inflation data for any
sign of softness that could signal an eventual slowdown in U.S.
After surging on Wednesday, the greenback struggled to hold
its gains, and the euro climbed around 0.3% to as high
as $0.9927, trying but failing to break back above parity
against the dollar, but holding clear of its 20-year low of
$0.9528 hit last week.
The European Central Bank releases minutes from last month's
policy meeting later in the day, which will be scrutinised by
traders for any light they could shed about the size of the next
European rate hike.
Sterling gained 0.35% to $1.1359, and the dollar
also slipped 0.5% against the Swiss franc to 0.9791
"Sentiment was very downbeat in late Q3, couldnt go
anywhere but up, did go up in early Q4, triggered by the Bank of
England intervening (in British government bond markets)," said
Stephen Gallo European head of FX strategy at BMO capital
"We dont really have fundamentally good reasons to be
buying sterling, euro or yen aggressively but we all know the
dollar is expensive and maybe the Fed is wrong, and it is going
to have to pivot."
A major factor driving currency markets currently is
changing expectations of how aggressively central banks' -
particularly the Federal Reserve - will raise interest rates.
A key question is whether they will pivot from primarily
worrying about inflation, and hence raising rates aggressively,
to also considering slowing economic growth, leading to more
cautious rate hikes.
This means U.S. jobs data due on Friday and inflation
figures next week will be closely watched.
"Investors will be looking (in Friday's payrolls report) for
signs of anything that might cause the Fed to do an early pivot,
everything they say suggests they have no intention of doing so,
but I suspect there are people out putting these pivot trades
on," said Gallo.
U.S benchmark treasury yields whose gains on
Wednesday had helped drive the greenback higher, were steady on
An unexpectedly modest 25 basis point hike in Australia this
week raised hopes other central banks may temper their
tightening soon, too.
Interest rate futures imply more than 130 basis
points of tightening ahead for the Fed before the middle of next
Australian dollar was at $0.6484. The New Zealand
dollar, riding an additional boost from a resolutely
hawkish central bank hike on Wednesday, made a two-week peak of
The yen, which has been held steady by the risk of
further Japanese intervention, was little changed at 144.56 per
The Saudi Arabia-led cartel of oil producers agreed to steep
production cuts on Wednesday, lifting Brent crude futures
to a three-week high of $93.99 a barrel.
That helped the Norwegian crown and Canadian dollar
outperform most peers, while hurting currencies like
the euro and pound.
"Higher energy prices would have a much more direct impact
on the European region given the more direct relationship to
their finances," said NatWest Markets' strategist Jan Nevruzi.
(Reporting by Tom Westbrook; Editing by Shri Navaratnam,
Lincoln Feast and Kim Coghill)