Currency markets subdued ahead of pivotal central bank week

HONG KONG: Major currencies traded in tight ranges on Monday to ​begin a busy week of central bank decisions and corporate earnings, while a pullback in oil ‌prices and Treasury yields weighed on the dollar.

Oil prices eased, with Brent crude futures down more than 1% at around $115 a barrel after hitting a six-month high last week, following a Reuters report that Qatari mediators were in Tehran on Sunday as part of an effort to ​de-escalate regional tensions in coordination with the US.

Meanwhile, US Treasuries largely held onto gains from a recent safe-haven ​rally, as elevated oil prices kept inflation worries alive and a tech-led selloff over concerns ⁠about AI spurred a rotation out of risk assets.

Yields on US 10-year notes were last down to 4.974% while ​those on 30-year notes were at 5.299%, hovering near one-month lows.

“For the time being, it seems to point to the ​US bond market being in the driving seat for broader dollar performance,” said Ray Attrill, head of FX strategy at National Australia Bank.

Dip in the dollar takes a breather with Fed in focus

“I think the market is sort of responding to the fall we’ve seen in Treasury yields and the fact that yield differentials between the ​US and other kind of G10 majors are compressing. I think that’s taken a little bit of the heat ​out of the US dollar.”

The euro rose 0.16% against the greenback to $1.122, aided by relief that France was spared a Moody’s downgrade despite ‌social unrest. ⁠Sterling strengthened 0.1% to $1.3385.

The dollar index , which measures the US currency against a basket of peers, was a shade weaker at 101.64.

The Australian dollar fetched $0.7030 , down 0.04%, while the kiwi traded 0.06% stronger at $0.572 .

The Japanese yen was largely steady and was last at 156.920 per dollar.

Central bank decisions in focus

Five major central banks will take centre stage later in the ​week, with the US Federal ​Reserve, the European Central Bank ⁠and the Bank of Japan expected to hold rates steady. Markets are pricing in potential hikes from the Bank of Canada and the Reserve Bank of New Zealand.

“Forward guidance ​could matter more than the decisions themselves,” said Chris Weston, head of research at Pepperstone, ​in a note.

“The ⁠decisions themselves may be largely discounted. The real issue that could move the dial in short-term rates and by extension is how policymakers shape expectations for subsequent meetings and whether markets need to reprice the forward rates curve.”

Thai baht/US dollar weaker on Thursday

Meanwhile, a packed US ⁠economic calendar ​will include an October consumer confidence report, a PCE price index, and ​jobless claims, which could provide additional clues on the outlook for Fed policy.

Elsewhere, gold was slightly lower; spot gold traded at $3,986.16 per ounce.

In cryptocurrencies, bitcoin ​was down 0.6% at $79,925.84, while ether was 1.1% lower at $2,317.33.