Monday, October 25, 2021

Dollar Inches To One-Year High As Payroll Test Looms

LONDON – The US dollar rallied back toward a one-year high versus key peers on Tuesday ahead of a major payroll report at the end of the week, boosting the case for the Federal Reserve to launch stimulus as soon as next month. could.

The safe-haven greenback was also supported by an equity sell-off stretching from Wall Street to Asia.

The risk-sensitive Australian dollar was one of the biggest losers, with the Reserve Bank of Australia reiterating that interest rates are not expected to rise until 2024, as expected, after keeping policy stable.

The US dollar index, which measures the currency against six rivals, rose 0.13 per cent to 93.957, having recovered from Thursday’s peak at 94.504, the highest level since the end of September 2020.

The index had risen as much as 2.8 per cent since September 3 as traders looked at a fall in prices this year and a possible rate hike for 2022.

The dollar has also benefited from demand havens amid concerns about the risk of a global stalemate for the US debt limit.

“The dollar started the week on the back foot yesterday, failing to mount in yet another equity sell-off, and suffering from OPEC+ decision to slowly cling to supply growth (400k barrels/day) of oil. Prices (and oil-sensitive currencies) higher,” ING Strategists said in a note.

“As highlighted in yesterday’s FX Daily, we believe the markets will continue to decline in the dollar, and this appears to have happened overnight, as the greenback has rebounded across the board.”

Friday’s non-farm payrolls data is expected to show continued improvement in the labor market, according to a Reuters poll, paired with a forecast for 488,000 jobs in September.

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Meanwhile, the index for Asia-Pacific equities fell 0.92 per cent after the S&P 500 lost 1.3 per cent overnight.

The Aussie retreated 0.34 percent to $0.7263 from Monday’s four-day high of $0.73045.

The New Zealand dollar fell 0.34 percent to $0.6939, having recovered from a four-day high of $0.6981. New Zealand’s Reserve Bank sets the policy on Wednesday, with markets rising in price by a quarter point.

“The RBA’s firm stance weighs heavily on the AUD,” Commonwealth Bank of Australia strategist Joseph Caperso wrote in a report.

As for the RBNZ, “the market is already pricing in the rate hike cycle, with the potential for material NZD upside down,” he said.

The dollar rose 0.25 percent to 111.19 yen, while the euro fell 0.21 percent to $1.15965.

Sterling traded flat at $1.3612.

While the consensus outlook is for further gains for the greenback – speculators have pushed net long bets to the highest level since March 2020 – TD Securities warns that headroom could be limited.

“While the near-term USD bias is more skewed, we are wary of pursuing moves at these levels,” Mark McCormick, TD’s global head of FX strategy, wrote in a report.

“There is already a lot of bad global news in the USD,” McCormick said, and “the key for the markets in the coming weeks is to resolve the extent of the already priced risk premium.”

by Ritwik Carvalho

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This News Originally From – The Epoch Times

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