Dollar wavers ahead of central bank meetings in Europe, Japan, Canada

27-Oct-2021 Intellasia | Reuters | 5:02 AM Print This Post

The dollar inched higher against the safe-haven yen while easing a touch against riskier currencies on Tuesday as solid company earnings and a glimmer of improvement in US-China trade ties lifted sentiment, while rates expectations weighed on the euro.

The greenback was last up 0.2 percent at 113.93 yen and was holding steady against the euro at $1.1599. Moves were slight as traders eye central bank meetings in Europe, Japan and Canada this week and data releases in Australia and the United States.

China’s vice Premier Liu He and US Treasury Secretary Janet Yellen held a video call which readouts from both sides suggested was at least not acrimonious.

Meanwhile earnings have driven US stock markets to fresh peaks and car-maker and mood barometer Tesla to a valuation above $1 trillion.

The risk-sensitive Australian dollar rose about 0.3 percent and poked past 75 US cents to $0.7513, China’s yuan was firm near a four-month high at 6.3845 per dollar and the South Korean won hit a seven-week peak.

“The dollar has been reversing lower because of a more risk on market, and that’s due to earnings coming in better than expected,” said Bank of Singapore analyst Moh Siong Sim, while investors await data and central bank meetings for direction.

The US dollar index held at 93.856 in between a one-year high of 94.563 hit earlier in the month and a one-month low of 93.483 made on Monday. Analysts expect it might stay there through a slew of central bank meetings in coming days.

“The dollar looks to be finding its feet in the mid-93s,” analysts at Westpac said in a note, as focus turns first to US growth data on Wednesday and then to the European Central Bank’s meeting on Thursday.

DATA AND POLICY

Anticipation of the ECB pushing back on market inflation forecasts as well as a soft German sentiment survey on Monday have dragged on the euro ahead of Thursday.

The ECB will likely underscore its dovish guidance, while US GDP will show the economy’s rebound stalling, Westpac’s analysts said, though the scene remains set for the Federal Reserve to announce a reduction in bond purchases next week.

“All told that should keep short-term yield spreads trending in the dollar’s favour and leave the dollar with a bid tone.”

Central bank meetings in Japan and Canada are also scheduled this week and rising inflation in Canada has increased pressure on policymakers to pull forward rate hikes. Traders are watching Wednesday’s meeting for any hawkish clues.

The Canadian dollar stands at C$1.2383 per dollar, having scaled a four-month peak last week.

No changes are expected from the Bank of Japan, although Reuters has reported that policymakers are discussing an end to a COVID-19 loan scheme.

Australian quarterly inflation data due on Wednesday is also likely to set the tone in a tussle between rates markets and the resolutely dovish Reserve Bank of Australia (RBA).

Economists expect growth in Australia’s trimmed mean consumer prices, the central bank’s preferred measure, to have accelerated to an annual pace of 1.8 percent in the September quarter from 1.6 percent in the preceding three months.

Beyond Friday, the Fed, the RBA and the Bank of England meet next week with markets having priced a roughly 60 percent chance that the Bank of England raises interest rates to head off inflation.

Sterling has been firming at the prospect of higher rates and was last steady at $1.3765. The New Zealand dollar rose 0.1 percent to $0.7174.

https://www.reuters.com/business/finance/dollar-wavers-ahead-central-bank-meetings-europe-japan-canada-2021-10-26/

 

Category: Japan

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