NEW YORK: The US dollar traded narrowly mixed on Monday, as investors weighed dovish remarks from Federal Reserve officials that boosted expectations for a rate cut next month, limiting the greenback’s upside against some of the major currencies such as the euro and Swiss franc.
The US currency, however, rose against the yen, as investors remained on the lookout for signs of official buying from Tokyo to stem the slide in the Japanese currency. The dollar also slightly gained versus commodity currencies such as the Australian and New Zealand units.
Volume was thinner than normal due to a holiday in Japan.
In mid-morning trading, the euro rose 0.1 percent against the dollar to USD1.1527, which put the dollar index down 0.1 percent at 100.17. Against the Swiss franc, the dollar slid 0.2 percent to 0.8074 franc.
Fed Governor Christopher Waller said on Monday that available data showed the US job market remains weak enough to warrant another quarter-point rate cut at the US central bank’s December 9-10 policy meeting.
His remarks followed those of New York Fed President John Williams on Friday who said that the US central bank can still cut interest rates “in the near term” without putting its inflation goal at risk.
Following their comments, Fed fund futures have increased the chances of an interest rate cut of a quarter-point next month to a nearly 80 percent chance, from 30 percent before their remarks, according to the CME’s FedWatch tool.
Several regional Fed governors, however, argued for delaying further easing until there is clear evidence that inflation is on track to fall to the Fed’s 2 percent target from a still-elevated level.
“While the odds have crept up a little bit more today in favor of a rate cut next month, it seems to be having just a little impact on the dollar, which means that it’s a bit of an open question,” said Marc Chandler, chief market strategist at Bannockburn Global in New York.
Markets are also gearing up for potential catalysts, including the release of US retail sales and producer prices data due later in the week.
The yen on Monday was the worst performer against the dollar, which rose 0.4 percent to 157.07 yen, just shy of its 10-month high hit last week of 157.90..
Japan’s currency has been sliding on a combination of looser fiscal policies and some of the lowest interest rates in the world, prompting traders to ask whether Japanese authorities might step in to stop their currency weakening further.
The yen, however, managed to gain some ground last Friday, bouncing from 10-month lows after Finance Minister Satsuki Katayama stepped up verbal intervention warnings to stem the currency’s decline.
Traders see a risk of intervention somewhere between 158 and 162 yen per dollar, with Thanksgiving-thinned trade later in the week a possible window for authorities to step in.
In other currency pairs, sterling was marginally softer at USD1.3085 against the dollar ahead of Wednesday’s budget announcement. Finance minister Rachel Reeves is seeking a balance between spending to support faltering growth and demonstrating to investors that Britain can meet its fiscal targets.
Cryptocurrency markets steadied over the weekend, but pressure resumed on bitcoin, which was down 1.8 percent at USD86,431.78.
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