NEW YORK, Sept 16 — The dollar index was down slightly yesterday but registered a gain for the week as investors expected the US Federal Reserve to remain aggressive when it hikes interest rates next week, while China’s yuan eased past the key threshold of 7 per dollar.
The dollar mostly held a slight gain following US data showing consumer sentiment improved moderately in September. The University of Michigan’s preliminary September reading on the overall index on consumer sentiment came in at 59.5, up from 58.6 in the prior month. Economists polled by Reuters had forecast a preliminary reading of 60.0 in September.
The dollar, measured against a basket of currencies, declined 0.1 per cent on the day to 109.68. It reached a two-decade high of 110.79 earlier this month. For the week, it was up 0.6 per cent, and it is up about 15 per cent for the year so far.
“This belief that we’re very close to a peak dollar, very close to peak yields,... is getting pushed back. We’re seeing a lot of strong bullish dollar calls,” said Edward Moya, senior market analyst at Oanda in New York.
“That positioning will probably be strongly reflected post-FOMC next week.”
Investors expect a high chance of a 75-basis-point rate hike at next week’s meeting and some chance of a 100-bps increase.
In crypto markets, ether, the token used in the Ethereum network, hit its lowest level since late July, and was last down 2.8 per cent. Bitcoin last fell 0.47 per cent to US$19,598.00.
Earlier, the rising dollar pushed the offshore yuan past the critical threshold of 7 per dollar for the first time in more than two years overnight.
The onshore unit similarly broke the key level soon after markets opened yesterday. Data showed China’s economy was surprisingly resilient in August, with factory output and retail sales both growing more than expected. But a deepening property slump weighed on the outlook.
Sterling fell against the dollar to a new 37-year low of US$1.1351 and was last down 0.5 per cent at US$1.1416, while the euro was up 0.1 per cent at US$1.0008.
British retail sales fell much more than expected in August, in another sign that the economy is sliding into a recession as the cost of living crunch squeezes households’ disposable spending.
While the Fed takes centre stage next week, the Bank of Japan (BOJ) and the Bank of England are also expected to have monetary policy meetings.
The dollar was 0.4 per cent lower against the yen at 142.87, but was up 0.2 per cent for the week in its fifth straight week of gains.
Three sources familiar with the thinking of the BOJ said the central bank has no intention of raising rates or tweaking its dovish policy guidance to prop up the yen.
“With the risk of the Fed that possibly could go a full point on Wednesday and with the Japanese holiday on Monday ... you’re probably going to see a little bit more patience in deciding when to make a move,” Moya said. “Any intervention now could be crushed by a Fed decision.” — Reuters