Dollar Fluctuates After Two-Day Decline as Fed Speakers Loom

Updated on
  • Yen falters as investors’ demand for a safe haven wanes
  • December Fed rate-hike bets drop to about 54% vs 61% week ago

A gauge of the dollar halted a two-day decline as investors awaited speeches by Federal Reserve policy makers, including Chair Janet Yellen, to assess the prospects for an interest-rate increase by year-end.

The dollar was steady against major peers after data Wednesday showed orders for U.S. durable goods were little changed in August. The yen fell for a second day as demand for haven assets waned after the first U.S. presidential debate between Hillary Clinton and Donald Trump.

“We see a high chance of a rate hike in December, and expect the dollar to trade slightly stronger by the end of the year,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank AG in Frankfurt. “But the dollar is currently moving sideways as the market is waiting for new impetus.”

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose 0.1 percent as of 8:36 a.m. in New York, after sliding 0.4 percent in the previous two days. The yen weakened 0.2 percent to 100.59 per dollar. The greenback was little changed at $1.1226 per euro.

Fed Moves

Fed Vice Chairman Stanley Fischer said Tuesday low interest rates have helped deliver U.S. labor-market gains that are feeding through to higher wages. While he didn’t discuss the timing of any increase in borrowing costs, he said the move in wage inflation from about 2 percent last year to about 2.5 percent this year provides evidence the connection between unemployment and inflation, which looked less convincing over the past decade, still exists.

Fed officials also due to speak Wednesday include Loretta Mester and Esther George, both of whom voted in favor of a rate increase at last week’s policy meeting.

The probability that the Federal Open Market Committee will increase rates in December has dropped to about even, from 61 percent a week ago, when Yellen said it made sense to put off a move for now to give the economy more room to grow.

Surprise Index

Citigroup Inc.’s U.S. Economic Surprise Index, while still below zero, has recovered from the lowest since July, reached earlier in September. A level below zero indicates data are falling short of forecasts. Swissquote Bank SA cautioned that any rebound in the dollar may be short-lived.

“The data remains firm, but unimpressive from historical norms,” said Peter Rosenstreich, head of market strategy at the bank in Switzerland. “We remain bearish on the dollar against high yielders and that is based on a view that the Fed will not raise interest rates this year.”

The yen fell as demand for havens declined after a CNN poll showed that 62 percent of voters who watched the debate said Clinton, the Democratic nominee, won the debate compared with 27 percent for Trump, the Republican. A Bloomberg Politics poll ahead of the event had the candidates deadlocked, clouding the outlook for U.S. policy.