NEW YORK/LONDON, Sept 13 (Askume) – The dollar fell to its lowest since December against the yen on Friday, as media reports suggested a 50 basis point interest rate cut at next week’s policy meeting, helping the dollar once again against the yen.
Analysts said reports from the Wall Street Journal and the Financial Times on Thursday night showed that a 50 basis point interest rate cut is still an option, while comments by former Fed officials advocating extreme interest rate cuts have also changed market expectations.
In the US interest rate futures market on Wednesday, the Federal Reserve cut interest rates by 50 basis points at the end of its September meeting. The probability of relief is 45%, up from about 15% on Thursday morning.
Futures traders also forecast a 117 basis point rate cut in 2024, up from 107 basis points in the previous session.
“The overall ambiguity around the next Fed rate cut is really pressuring the dollar,” said Boris Kovacevic, global macro strategist at Convera, based in Vienna, Austria.
“In the Fed’s lockdown, everybody was expecting a 25 basis point rate cut, because the last jobs report came out the day before the lockdown. So the Fed has prepared the market for a significant rate cut. “There’s plenty of time to do it.”
“It will depend on how the Fed wants the market to see it,” Kovacevic said of the Financial Times and Wall Street Journal articles.
“If they want to be seen as meeting the needs of the labor market, I think they need to go to 50. But if they want to be seen as prioritizing their inflation mandate, they need to go to 25.”
In early trade, the dollar fell 0.7% to 140.69 yen against the yen, having earlier hit 140.285, its lowest since late December. The dollar has fallen 1% this week.
Meanwhile, the euro rose 0.2% against the dollar to $1.1091.
The European Central Bank cut interest rates by 25 basis points, but ECB President Christine LagardeThat dampened expectations for another rate cut next month .
The U.S. dollar index fell 0.2% to 100.97 as the euro rose. The dollar eased its losses after data showed U.S. consumer confidence improved as inflation eased in September.
The preliminary value of the University of Michigan’s consumer confidence composite index was 69.0 this month , compared with 67.9 in August. Economists polled by Askume had expected a preliminary reading of 68.5.
This week’s US economic data appears to support the case for a 25 basis point rate cut next week, with a measure of consumer price inflation that offsets volatile food and energy prices rising more than expected in August .
But former New York Federal Reserve Chairman Bill Dudley on Friday fueled speculation of a 50 basis point rate cut, saying there was good reason for a 50 basis point cut and that rates currently hover around 150-150 basis point above the so-called neutral rate. %. He said, “Why not start now?”
“The euro is back at $1.11, supported by a combination of the European Central Bank not being accommodative enough and the Fed’s increasingly dovish stance,” said Francesco Pesole, currency strategist at ING.
Sterling rose 0.2% to $1.3147, hitting its highest level in a week. The Bank of England is expected to keep interest rates at 5% next week after cutting interest rates by 25 basis points starting in August.
USD/CHF fell 0.4% to CHF0.8480.
Investors are also paying attention to the Bank of Japan’s interest rate decision next Friday, which is expected to remain steady at 0.25%.
Bank of Japan board member Naoki Tamura said on Thursday that the central bank should raise interest rates by at least 1% in the second half of the next fiscal year , but he also said the central bank could gradually raise interest rates in stages.
