TOKYO/LONDON: The US dollar slipped against a basket of peers on Wednesday after comments from Federal Reserve Chair Jerome Powell bolstered bets on a series of rate cuts in coming months, while a broader improvement in risk sentiment took the shine off the greenback.
Francesco Pesole, FX strategist at ING said an improvement in risk sentiment on Tuesday and overnight was weighing on the dollar, which had been benefitting from the reverse.
“Earnings were pretty good (on Tuesday) and the S&P opened low, but throughout the day actually had a pretty good session. I think the dollar was getting some decent flows from the souring in risk sentiment so the improvement actually seemed to weaken it,” said Pesole.
He also said increased optimism in European markets over France’s political situation was helping the euro. The euro added 0.17 percent to USD1.16265 after gaining 0.3 percent in the previous session, supported by the French government’s proposal to suspend landmark pension reforms.
The dollar index, which measures the US currency against six major peers, fell 0.2 percent to 98.843 as of 1104 GMT, extending a 0.2 percent decline from the prior session.
Meanwhile the yen and Australian dollar were standout performers as each continued to recover from steep drops versus the greenback last week.
Some analysts also pointed to a tailwind from Beijing’s decision to set the official yuan fixing on the stronger side of the closely watched 7.1 per dollar line for the first time since last November.
The risk-sensitive Aussie gained despite a simmering tariff spat between Beijing and Washington.
The yen rallied even as uncertainty deepened over who will become Japan’s next premier, with local media reporting that a parliamentary vote mooted for next Tuesday may be delayed amid political wrangling.
Sterling gained 0.33 percent to USD1.3363, bouncing back from declines on Tuesday, when official data showed a cooling in wage growth. Britain’s finance minister Rachel Reeves said she was looking at both tax rises and spending cuts for her budget on November 26, confirming widely held expectations given her pledges about balancing the country’s books.
Stocks were shining in Europe on Wednesday, with a spate of positive earnings from major names lifting the STOXX 600 0.7 percent. “Earnings - whether they are in Europe or in the US - if they are good, they tend to take some shine off the dollar,” said Pesole.
Also weighing on the dollar was the dovish tone struck by Fed chair Powell, who in a speech on Tuesday left the door open to rate cuts by saying the US labour market remained mired in low-hiring, low-firing doldrums.
The Aussie climbed 0.5 percent to USD0.652, after falling 0.5 percent a day earlier, when it touched the lowest since August 22 at USD0.64405. However, the New Zealand dollar edged up only 0.2 percent to USD0.5729, after dipping to a six-month low of USD0.56839 on Tuesday.
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