🎈 Up Big Today: Find today's biggest gainers with our free screenerTry Stock Screener

Dollar jittery as market eyes CPI data; Aussie, kiwi rise on China

Published 2024-12-09, 12:43 a/m
© Reuters. FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto, January 23, 2015.    REUTERS/Mark Blinch/File Photo
EUR/USD
-
USD/JPY
-
AUD/USD
-
CAD/USD
-
DX
-

By Vidya Ranganathan and Greta Rosen Fondahn

SINGAPORE/LONDON (Reuters) -The euro held steady against the dollar in skittish trading on Monday as investors awaited U.S. inflation data later this week, while the Australian and New Zealand dollars rallied after China pledged an "appropriately loose" monetary policy next year.

While markets have priced in a quarter-point rate cut by the U.S. Federal Reserve next week as a near certainty, investors are waiting for U.S. consumer price data on Wednesday.

"The move higher in unemployment that we saw in November, that really just cements the case for a 25-basis point cut next Wednesday," said Michael Brown, senior research strategist at Pepperstone.

"Unless we get a really hot inflation number, but that's certainly not the base case."

"The Fed are much more focused at this moment in time on the labour market as opposed to developments with regards to inflation," he added.

Data on Friday showed that U.S. job growth surged in November, but a rise in the unemployment rate to 4.2% pointed to an easing labour market that should allow the Fed to cut interest rates again this month.

The euro was flat against the dollar at $1.0566, having fallen earlier by as much as 0.3%, while the greenback gained 0.34% against the yen to 150.515. The dollar index was flat at 105.96.

Brown expected the upcoming U.S. inflation data, European Central Bank policy meeting on Thursday and Fed rate decision next week to lead to subdued trading in currencies for the time being, "given the amount of event risk that we've got on the horizon".

Mizuho (NYSE:MFG) Bank strategist Vishnu Varathan also pointed to a host of geopolitical developments, such as the weekend fall of Syrian President Bashar al-Assad, alongside macro- and Trump-related trades as providing markets further impetus to stay long dollars.

"There's no incentive to short the dollar against any particular currency," he said.

The Australian dollar gained 0.84% on the greenback, and the kiwi rose 0.5%, after China announced a shift in monetary policy to spur growth.

The two currencies often serve as a proxy for the Chinese yuan, which strengthened in the offshore market to leave the dollar down 0.13% at 7.275.

China will adopt an "appropriately loose" monetary policy next year as part of steps to support economic growth, and will implement a more proactive fiscal policy and step up "unconventional" counter-cyclical adjustments, state media reported on Monday, citing a Politburo meeting.

The central bank has outlined five policy stances - "loose", "appropriately loose", "prudent", "appropriately tight" and "tight" - with flexibility on either side of each.

China adopted an "appropriately loose" monetary policy after the 2008 global financial crisis, before switching to "prudent" in late 2010.

The dollar rose 0.53% versus South Korea's won. Over the weekend, South Korean President Yoon Suk Yeol survived an impeachment vote in parliament prompted by his short-lived attempt to impose martial law last week.

Last week's headliner, bitcoin, which hit six-figures for the first time at a record $103,649, was last at $98,282.

CENTRAL BANK MEETINGS

The main events investors are watching this week are the ECBpolicy meeting on Thursday, where a quarter point cut is baked in, and China's closed-door Central Economic Work Conference.

The Bank of Canada (BoC), the Swiss National Bank (SNB) and Reserve Bank of Australia (RBA) meet this week, with deep rate cuts expected from the first two that could turn yield differentials even more against their currencies.

The Canadian dollar traded near a 4-1/2-year low on Monday as markets anticipate another outsized interest-rate cut. The loonie pared some earlier losses and the dollar was last down 0.21% against the currency.

© Reuters. FILE PHOTO: A Canadian dollar coin, commonly known as the

The RBA is the only central bank among its peers that has not yet begun cutting rates, and it isn't expected to do so in December either, although it might soften its tone on growth targets.

This week will be an interesting one for the Swiss franc, given the intense debate about how deep the SNB's fourth rate cut of the cycle will be. Markets give a higher probability for a larger 50-basis point cut, and are even priming for negative interest rates by next year.

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.