Singapore, April 5 (BNA): The US dollar was stuck near two-month lows on Wednesday as weak economic data reinforced views that the Federal Reserve is nearing the end of its tightening cycle, while the New Zealand dollar jumped after a larger rally. The interest rate is expected to rise.
New Zealand’s central bank raised interest rates by 50 basis points to a more than 14-year high of 5.25% in a move that surprised markets, with 22 of 24 economists polled by Reuters expecting an increase of only 25 basis points.
The kiwi rose 1% to touch a two-month high of $0.6383 after the decision. It rose in the latest transactions by 0.55% to $0.635.
The central bank’s position is that near-term inflationary pressures have increased and inflation remains high and persistent, said Christopher Wong, currency analyst at OCBC, adding that the increase is bringing the tightening cycle to an end.
Elsewhere, overnight data showed that job openings in the United States fell to their lowest level in nearly two years in February, indicating that labor market conditions are finally easing.
The monthly job vacancies and labor turnover, or JOLTS report, showed job vacancies, a measure of labor demand, fell by 632,000 to 9.9 million on the last day of February. Economists polled by Reuters had expected an opening of 10.4 million.
The dollar index, which measures the currency against six peers, fell to a fresh two-month low of 101.43, after falling 0.5% overnight. The last time was at 101.57.
The euro settled at $1.0953, below the two-month peak it touched on Tuesday. Sterling was latest at $1.2483, down 0.13% on the day, off a ten-month high hit on Tuesday.
“The market is still looking closely at the US data,” said Moh Seong Sim, currency analyst at Bank of Singapore. “The market is very sensitive to how stable the growth outlook in the US is in light of banking pressures.”
Weaker-than-expected US jobs data led the markets to revise their expectations for an interest rate hike. And the CME FedWatch tool showed that markets are now pricing in a 59% chance that the Fed will stand on interest rates at the next policy meeting in May. Markets were factoring in a 43% chance of the Fed not raising interest rates the day before.
A report last week showed that although inflation eased in February, it remained high enough to force the Fed to raise interest rates again this year.
“I think if you remove all concerns about growth in the US as a result of banking pressures and look objectively, the data seems to say it’s going in the right direction, but it’s not quite there yet,” he said. Singapore Sim Bank.
Perhaps the Fed should do more and keep interest rates higher for longer.
At the policy meeting in March, most Fed policymakers indicated they expected the need to raise interest rates again, to 5.1%, and not cut them until 2024.
Loretta Mester, President of the Federal Reserve Bank of Cleveland, said on Tuesday that while the economy appears to be on the way to a slowdown, further rate hikes by the central bank are likely.
A Reuters poll of foreign exchange strategies showed that the US dollar is likely to weaken against most major currencies in 2023 as the interest rate gap narrows with its peers, putting the US currency on the defensive after several years.
“Focus will shift to Friday’s headline employment report, where the consensus is to opt for further moderation in non-farm payroll growth to 240K,” said Rodrigo Cattrell, chief currency strategist at National Australia Bank.
In the US bond market, the two-year US Treasury yield, which usually moves according to interest rate expectations, rose 2.8 basis points at 3.862%, after falling 14 basis points on Tuesday.
The yield on the 10-year Treasury rose 1.3 basis points to 3.350%, after falling 9 basis points overnight.
The Australian dollar fell 0.09% to $0.675, a day after the Reserve Bank of Australia left the cash rate unchanged at 3.6%, snapping 10 straight hikes, saying it needed more time to assess the impact of previous increases.
HF