⏳ Final hours! Save up to 60% OFF InvestingProCLAIM SALE

Dollar higher but gains in check as risk appetite rebounds

Published 2022-10-17, 10:09 p/m
© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration
USD/CAD
-
GBP/CAD
-
GS
-
JNJ
-
BTC/USD
-

By Saqib Iqbal Ahmed

NEW YORK (Reuters) - The U.S. dollar edged higher against a basket of currencies on Tuesday, shaking off some of the weakness of the previous session, but a revival in risk appetite in global financial markets kept a lid on its gains.

"Yesterday's risk-on vibe looks to be continuing into today's session," said Michael Brown, head of market intelligence at payments firm Caxton in London.

"A lack of any major headlines, coupled with some semblance of fiscal stability in the UK, appear to be the culprits," he said.

Britain's new Finance Minister Jeremy Hunt on Monday scrapped Prime Minister Liz Truss's economic plan, which had sapped investor confidence in Britain in recent weeks.

Relief at the U-turn prompted a rally in risk assets, including on wall Street. U.S. stock market gains were also driven by strong corporate earnings from Goldman Sachs (NYSE:GS) and Johnson & Johnson (NYSE:JNJ).

The British finance minister's decision to reverse most of the government's "mini-budget" prompted investors to reassess the outlook for UK interest rates and sent the pound 0.4% lower on the day to $1.1316.

The Bank of England said on Tuesday it would go ahead with plans to start selling some of its huge stock of government bonds with the first sale due on Nov. 1, a day later than previously planned to avoid clashing with a government fiscal statement.

Last month, that market upheaval caused by the government's now-abandoned tax-cutting mini-budget, prompted the BoE to start an emergency round of bond-buying and push back the start of its 'quantitative tightening' (QT) sales from Oct. 6 to Oct. 31.

Against a basket of currencies, the dollar was 0.07% higher at 112.15, having earlier slipped to a near two-week low of 111.76. The index, which fell 1% in the previous session, remains just 2% shy of the two-decade high of 114.58 touched in late September.

"With the Fed remaining one of the most hawkish G10 central banks, and downside risks to the outlook continuing to intensify ... I stay bullish on the USD over the medium-term," Caxton's Brown said.

The dollar found some support after data showed production at U.S. factories rising in September, led by output gains in durable and nondurable goods, indicating that the manufacturing sector remains on a reasonable footing despite the Federal Reserve's efforts to limit demand through higher interest rates.

Meanwhile the Japanese yen traded near a 32-year trough to the dollar at 149 yen, putting the major psychological barrier of 150 in focus and raising the possibility of the Bank of Japan doing more to support the battered currency after its first yen-buying intervention since 1998 on Sept. 22.

"I think there is an expectation that they (Bank of Japan) may intervene, however authorities seem more concerned with the speed of any move rather than the level at which we trade," Brown said.

© Reuters. FILE PHOTO: U.S. Dollar banknote is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

The risk-sensitive New Zealand dollar rose about 0.63% to $0.5671, taking support from hotter-than-expected consumer inflation data which bolstered bets for further rate hikes.

Bitcoin was 1.9% lower at $19,165, clinging close to the levels it has traded at for the last four weeks.

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.