Singapore, Oct. 31 (BUS): The dollar rose on Monday after strong consumer spending data pointed to continued core inflation pressure, calming bets that the US Federal Reserve could signal a slowdown in its monetary tightening campaign.
The dollar was broadly higher in Asian trading, particularly against the Japanese yen, rising more than 0.5% and pushing above the 148 yen level, Reuters reported.
The yen last traded at 148.08 against the dollar, under greater pressure from the Bank of Japan (BOJ) decision to keep interest rates ultra-low on Friday, and comments by Bank of Japan Governor Haruhiko Kuroda who remains dovish in the face of interest rate hikes elsewhere.
The pound and the euro fell about 0.1% against the dollar, which offset some of last week’s losses, after retreating on hopes of a possible Fed change.
“Markets were kind of expecting the Fed to be central to monetary policy. I think that’s premature, given how resilient the economy is and especially how high inflation is,” said Carol Kong, currency analyst at Commonwealth Bank of Australia. CBA).
Friday’s data showed that US consumer spending rose more-than-expected in September, while core inflation pressures continued to emerge.
The Federal Reserve is expected to raise interest rates by another 75 basis points after wrapping up this week’s policy setting meeting on Wednesday.
Sterling was last down 0.12% at $1.1600, although it was on track for a monthly gain of about 4%, leading to a strong rebound after former British Prime Minister Liz Truss’ economic program sparked market turmoil last month.
Since then, investors have benefited from the appointment of the new prime minister, Rishi Sunak, who has vowed to pull the country out of a deep economic crisis.
“The pound has really recovered somewhat over the past few weeks, and I think a lot of that really reflects the fading of the previous market turmoil and the easing of UK policy uncertainty,” said CBA’s Kong.
The euro last bought $0.99535, but it was also headed for a monthly gain of more than 1%, the first since May.
“The euro has also benefited from the recent sharp drop in gas prices, although I doubt this will continue,” Kong said.
Ahead of another central bank decision this week, the Australian dollar rose 0.09% to $0.6417.
The Reserve Bank of Australia (RBA) is expected to raise interest rates by 25 basis points at its meeting on Tuesday, even as inflation accelerated to a 32-year high in the last quarter.
“We expect the RBA’s board to commit to a 25 basis point rate hike on Tuesday, as we believe it is too early for the board to reverse the judgment it made at its October meeting on paring the scale of rate increases,” ANZ analysts said.
“But we are now looking at a 25 basis point follow-up in December. Along with another 75 basis point rate increases in the first half of 2023, we now have the RBA cash rate peaking at 3.85%.”
The New Zealand dollar rose 0.1% at $0.58215, but was on track for a monthly gain of more than 3%, reversing two straight months of losses.
Against a basket of currencies, the US Dollar Index held steady at 110.81, some distance away from a one-month low of 109.53 hit last week.
EAE