US dollar stands tall as upbeat data trims Fed cut bets

US dollar's strength this week was based on hopes of a ceasefire in the damaging trade war, and strong US economic data. ― Reuters pic
US dollar's strength this week was based on hopes of a ceasefire in the damaging trade war, and strong US economic data. ― Reuters pic

SINGAPORE, Nov 29 — The US dollar headed for its highest weekly finish against the safe-haven yen since May today, as data showing the US economy on a firm footing prompted investors to scale back rate-cut bets.

Nerves persisted though, as other major currencies spent the week rangebound, navigating a blizzard of trade-war headlines that offered few clues as to when or how an overdue truce might be agreed between Washington and Beijing.

“There seems to be pretty good optimism around the trade talks going on between US and China,” said William O'Loughlin, a portfolio manager at Rivkin Securities in Sydney.

“Though as we know that can change on a dime...the rally doesn't feel like a euphoric, super-bullish rally, it does feel like climbing the wall of worry.”

Today, the dollar was steady at 109.51 Japanese yen, and if it holds there will post a 0.7 per cent gain for the week and hit its highest weekly close since May 31. Overnight trade was light with US desks closed for Thanksgiving.

The British pound has been the week's other main beneficiary, adding half a percentage point as Prime Minister Boris Johnson's Conservative Party has firmed in opinion polls ahead of the December 12 election.

Sterling was steady today at US$1.2910, while the euro held at US$1.1012.

“The market has come to the view that this is Johnson's election to lose now,” said Chris Weston, head of research at Melbourne brokerage Pepperstone, with expectations he can win with a large margin.

“That said, should any polls call this margin into question, where invariably there will be one or two, then GBP could see a sharp sell-off, although I would be using that weakness to buy.”

The US dollar's strength this week has drawn on hopes that the United States and China are indeed in the process of negotiating a ceasefire in their damaging tariff war, and strong US economic data.

China has vowed to impose “firm countermeasures” after Trump's approval of a bill backing Hong Kong's pro-democracy protesters on Wednesday, but is yet to indicate whether they would have any bearing on trade talks.

US growth picked up slightly in the third quarter, data showed on Wednesday, in contrast to other indicators showing a slowdown in global activity.

The Fed also flagged an upbeat outlook amid signs of labour market strength and a possible turnaround in business investment.

That prompted a pullback on rate cut bets for this year and next, with the market now pricing in a 5 per cnet chance the Fed will hike rates next month and mostly expecting it to hold steady.

The strong greenback has Australian dollar slightly weaker for the week, but steady today ahead of a central bank meeting on Tuesday, where the market has priced an 11 per cent chance of a cut in interest rates to a record low 0.5 per cent.

It last traded at US$0.6767, not far above a six-week low hit yesterday.

The New Zealand dollar was flat today at US$0.6418 and held its ground for the week, buoyed by rebounding business sentiment.

China's yuan was steady at 7.0287 per US dollar in offshore trade. — Reuters

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