By Tom Westbrook
SINGAPORE, Dec 21 (Reuters) - The dollar found a footing
on Thursday as a sudden end to a strong rally for U.S. stocks
had investors looking for safety and as an unexpected fall in
British inflation hit the pound.
Sterling suffered its sharpest drop in two months
overnight after British inflation dived below forecasts to an
annual 3.9% in October, its lowest for two years.
Traders scrambled to price rate cuts by May and the currency
dropped 0.7% to $1.2638.
"The data suggests that inflation momentum in the United
Kingdom is finally losing steam, allowing the Bank of England to
join the global rate cutting cycle next year," said analyst
Marios Hadjikyriacos of brokerage XM.
Elsewhere heavy selling in the final hour of equities trade
on Wall Street sent a ripple of risk-aversion through markets,
lifting what had been an under-pressure greenback from lows.
The Australian and New Zealand dollars retreated from
five-month highs. The Aussie was last at $0.6714,
having touched its highest since July at $0.6779 a day earlier.
The kiwi traded at $0.6257.
The euro was stable at $1.0943. The yen
found support at 143.5 per dollar, after having lost ground on
Tuesday when the Bank of Japan left its ultra-easy policy
settings unchanged.
Currency markets' next focus is on Friday's release of the
U.S. core personal consumption expenditure (PCE) index which is
forecast by analysts to rise 0.2% in November with the annual
inflation rate slowing to its lowest since 2021 at 3.3%.
Analysts suspect the balance of risk is on the downside and
the slowdown in inflation means the Fed will have to ease policy
just to stop real rates from rising.
But with 150 basis points of cuts already priced in next
year, a massive rally in the bond market and the dollar index
down more than 4% from an early November high, some signs
of caution are creeping in.
"Some adjustments in positions and paring back of risks
ahead of (this) event...is only sensible," said OCBC currency
strategist Christopher Wong in Singapore.
"Liquidity is getting thinner as we get closer to the
festive season, thin liquidity can exacerbate price movements on
any data surprises."
The dollar index, down 1% for the year so far, was steady at
102.37 in early Asia trade on Thursday. Ten-year U.S. Treasury
yields hit a seven-month low of 3.847% in New York.
China's yuan slipped on the rising dollar in
overnight offshore trade, and as traders see no let up in
China's accommodative monetary stance.
It was steady at 7.1480 to the dollar on Thursday.
Bitcoin leapt briefly above $44,000 on Wednesday
and was steady at $43,667 on Thursday.
========================================================
Currency bid prices at 0045 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar
$1.0950 $1.0943 +0.06% +0.00% +1.0950 +1.0937
Dollar/Yen
143.4350 143.6750 -0.16% +0.00% +143.5550 +143.3700
Euro/Yen 157.02 157.07 -0.03% +0.00% +157.1200 +156.8700
Dollar/Swiss
0.8624 0.8626 +0.01% +0.00% +0.8627 +0.8627
Sterling/Dollar
1.2643 1.2639 -0.02% +0.00% +1.2643 +1.2636
Dollar/Canadian
1.3351 1.3371 -0.11% +0.00% +1.3370 +1.3356
Aussie/Dollar
0.6744 0.6731 +0.19% +0.00% +0.6745 +0.6720
NZ
Dollar/Dollar 0.6259 0.6248 +0.20% +0.00% +0.6260 +0.6247
All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook.; Editing by Michael Perry)
Dollar steadies as stocks slip
December 20, 2023 at 08:05 pm EST
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