🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

US dollar rises, Aussie drops after Chinese trade data

Published 2024-12-09, 08:48 p/m
© Reuters. FILE PHOTO: U.S. one hundred dollar notes are seen in this picture illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won/File Photo
USD/JPY
-
AUD/USD
-
NZD/USD
-
DX
-

By Hannah Lang

NEW YORK (Reuters) -The dollar rose on Tuesday ahead of U.S. inflation data that could offer clues about the Federal Reserve's monetary-easing path, while analysts assess the likely impact of President-elect Donald Trump's policies when he begins his second term.

The Australian dollar dropped sharply against the U.S. dollar as the Reserve Bank of Australia softened its tone on the inflation outlook. Its rally the day before sparked by China stimulus pledges also tapered off after weak Chinese trade data.

Money markets are pricing an 86% chance of a 25-bps rate cut by the U.S. Federal Reserve next week, but investors will still be looking closely at an expected readout of Consumer Price Index data on Wednesday.

"Obviously the market's kind of nervous about a stronger print, which might lead to a slightly more hawkish outlook on the Fed, or maybe a little bit of a repricing," said Brad Bechtel, global head of FX at Jefferies. "I think the market is looking to see if CPI influences the decision on the December meeting, which right now is pretty much close to 100% priced, but not 100% priced."

The U.S. dollar rose 0.47% to 151.925 yen. The dollar index, which measures the currency against the yen and five other major peers, rose 0.23% to 106.4.

Market participants see little action before a busy second half of the week with the U.S. data and European Central Bank policy meeting.

An ECB quarter-point cut is baked in, but investors will focus on the communication, which could provide clues about the central bank's future moves.

The euro dropped 0.27% to $1.0526.

The Aussie fell 0.93% to $0.6381, after earlier dropping to its lowest level since August.

It rose 0.8% the previous day after China pledged an "appropriately loose" monetary policy next year.

"If we can get Chinese stocks to rally, China-sensitive commodities like copper to rally, that could depress the U.S. dollar a little bit," said Erik Bregar, director of FX & precious metals risk management at Silver Gold Bull. "You can feel there's a lot of pressure over there to do something."

China's exports grew at a slower pace in November, while imports unexpectedly shrank, affecting expectations for the Australian economy, as China is its largest trading partner.

Chinese equities eased gains while Hong Kong stocks declined as the initial optimism over Beijing's policy shift faded.

The RBA held rates steady as expected, but noted the board had gained "some confidence" inflation was heading back to target.

"A full pricing-in (of a rate cut) over the next few weeks would weigh further on the Australian dollar," said Volkmar Baur, forex strategist at Commerzbank (ETR:CBKG), recalling that two labour market reports and the inflation figures for the fourth quarter will be published before the next policy meeting in February.

The New Zealand dollar dropped in sympathy with the Aussie, declining 1.1% to $0.5801.

Investors will closely watch China's closed-door Central Economic Work Conference this week, which sets key targets and policy intentions for next year.

The yuan was last at 7.2602 per dollar in offshore trading, supported by Monday's surprise shift in Beijing's monetary policy stance toward more easing to boost the ailing economy.

© Reuters. FILE PHOTO: U.S. one hundred dollar notes are seen in this picture illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won/File Photo

Elsewhere, the Bank of Canada and the Swiss National Bank decide policy on Wednesday and Thursday, respectively, with deep rate cuts expected from both.

Against Canada's loonie, the U.S. dollar rose to its strongest level since April 2020 at C$1.4165.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.