By Karen Brettell
NEW YORK (Reuters) – The dollar fell on Wednesday as risk sentiment improved and investors focused on rising commodity prices and when global central banks are expected to start raising interest rates for to deal with still high inflation.
The greenback hit a one-year high against a basket of other currencies last week as market participants bet the Federal Reserve will hike rates sooner than expected to ease mounting price pressures.
Those bets have faded, however, as investors anticipate even more aggressive rate hikes in other countries and commodity-linked currencies, including the Canadian and Australian dollars, outperform.
â€œWhen it comes to central banks, there are a lot of aggressive pricing,â€ said Bipan Rai, North American head of foreign exchange strategy at CIBC Capital Markets in Toronto, noting that the market is likely overestimating how quickly the price increases. rate will occur.
The dollar index fell 0.24% to 93.57.
Rai expects the dollar to outperform if investors lower expectations for rate hikes in other countries, although “this is something that will take some time to correct.”
â€œAs things go, given the underlying fundamentals in the United States, which are still very constructive for growth, we think the Fed will likely be the central bank that hikes rates over the next few years to a bit more of a more aggressive clip than the market currently anticipates, â€said Rai.
Market participants predict that the Fed will hike rates twice by the end of 2022.
Fed Governor Randal Quarles said on Wednesday that if it was time for the Fed to start cutting back on its bond buying program, it would be premature to start raising interest rates in the face of inflation. high which is expected to decline next year.
The Fed also said in its latest beige book that the US economy grew at a “modest to moderate” rate in September and early October, as the latest wave of COVID-19 cases peaked and began to recede.
ING FX strategists said in a client note that the recent dollar decline could be due to a combination of markets closing long dollar positions and “a benign risk environment, where a strong earnings season in states United continued to offset concerns about inflation and monetary tightening.
â€œAt this point, it looks like the dollar lacks catalysts to contain the ongoing correction, and any support for the greenback may need to come from a cooling in the recent risky mood in the markets,â€ ING said.
The Australian dollar, seen as a liquid indicator of risk appetite, gained 0.60% on the day to $ 0.7522, the highest since July 7.
The New Zealand dollar rose 0.73% to $ 0.7205, the highest since June 11.
Reduced demand for safe-haven assets saw the dollar peak in four years at 114.67 against the yen overnight, before falling back to 114.27.
The Canadian dollar was higher the day after the country’s annual inflation rate accelerated to an 18-year high in September, putting the spotlight on the Bank of Canada ahead of a rate decision next week.
The greenback fell 0.35% against the loonie to C $ 1.2317.
The British pound gained 0.30% on the day to $ 1.3831 after data showed UK inflation unexpectedly slowed last month. The numbers have hardly changed expectations that the Bank of England will become the world’s first major central bank to raise rates.
In cryptocurrencies, bitcoin hit an all-time high of $ 67,017, a day after America’s first bitcoin-based exchange-traded fund began trading.
Price of currency offers at 3:08 p.m. (1908 GMT)
Description RIC Last closure US Pct Change YTD Pct High Bid Low Bid
Dollar index 93.5720 93.8060 -0.24% 3.991% +93.8800 +93.5370
Euro / Dollar $ 1.1653 $ 1.1632 + 0.18% -4.63% + 1.1658 $ + 1.1617
Dollar / Yen 114.2700 114.4000 -0.19% + 10.55% +114.6950 +114.0800
Euro / Yen 133.17 133.06 + 0.08% + 4.92% +133.4800 +132.7500
Dollar / Switzerland 0.9190 0.9230 -0.44% + 3.87% +0.9252 +0.9187
Pound sterling / dollar $ 1.3831 $ 1.3790 + 0.30% +1.24% +1.3834 $ +1.3743
Dollar / Canadian 1.2317 1.2363 -0.35% -3.25% +1.2367 +1.2308
Aussie / Dollar $ 0.7522 $ 0.7477 + 0.60% -2.22% + $ 0.7522 + $ 0.7465
Euro / Switzerland 1.0710 1.0733 -0.21% -0.90% +1.0765 +1.0706
Euro / Sterling 0.8424 0.8431 -0.08% -5.74% +0.8460 +0.8424
NZ $ 0.7205 $ 0.7154 + 0.73% + 0.36% + $ 0.7208 + $ 0.7147
Dollar / Dollar
Dollar / Norway 8.3095 8.3525 -0.51% -3.23% +8.4120 +8.3065
Euro / Norway 9.6855 9.7187 -0.34% -7.47% +9.7789 +9.6828
Dollar / Sweden 8.5844 8.6203 -0.26% + 4.73% +8.6361 +8.5818
Euro / Sweden 10.0038 10.0295 -0.26% -0.72% +10.0456 +10.030
(Reporting by Karen Brettell; Additional reporting by Elizabeth Howcroft in London; Editing by Steve Orlofsky and Will Dunham)