The euro edged up against the dollar but euro investors remained worried about a weak eurozone economic outlook that risks deteriorating further. The WSJ Dollar Index fell, putting the greenback on course to snap a seven-day streak of gains fueled by rising bond yields.
The dollar pulled back from its highest level since November against a basket of peers on Thursday, after a climb that has brought the yen near a key intervention zone and the euro to an eight-month low, as U.S. longer-dated yields extend their rise. "If that (January low) goes then we could go a bit closer to euro/dollar parity, but our base case scenario is that unless there's another negative shock for Europe then that won't be sustained," said Lee Hardman, senior currency analyst at MUFG. Hardman said the euro was weakening, partly because of the stronger dollar on the back of higher U.S. yields and also because of "the cyclical divergence story: the U.S. economy has been more resilient while the European economy has been weaker."
The dollar steadied near its highest level since November against a basket of its peers on Thursday, keeping the yen near a key intervention zone and the euro at an eight-month low, as U.S. longer-dated yields extended their rise. "If that (January low) goes then we could go a bit closer to euro/dollar parity, but our base case scenario is that unless there's another negative shock for Europe then that won't be sustained," said Lee Hardman, senior currency analyst at MUFG. Hardman said the euro was weakening, partly because of the stronger dollar on the back of higher U.S. yields and also because of "the cyclical divergence story: the U.S. economy has been more resilient while the European economy has been weaker."
Strong U.S. economic data has defied investor expectations for a slowdown and the Federal Reserve last week warned that it could raise interest rates again and is likely to hold rates higher for longer. "The U.S. is most able to cope with these new challenges - higher interest rates and higher energy prices," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. The U.S. dollar index, which measures the greenback against a basket of other major currencies, reached 106.84, the highest level since Nov. 30.
The concept of higher for longer interest rates is providing a tailwind to the greenback which is trading at 10-month highs.
“The U.S. is most able to cope with these new challenges - higher interest rates and higher energy prices,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. Federal Reserve Bank of Minneapolis President Neel Kashkari said Wednesday it is not clear yet whether the central bank is finished raising rates amid ample evidence of ongoing economic strength. YEN ON INTERVENTION WATCH Elevated U.S. yields have spelt trouble for the yen , which slipped to an 11-month low of 149.4 per dollar.
Euro zone governments will try to bolster their public finances next year by withdrawing expensive energy price subsidies but slower economic growth and fear of angering voters are likely to limit fiscal tightening, officials said. The European Central Bank has called for governments to roll back subsidies introduced to help people cope with the spike in energy prices that followed the start of the Ukraine war, saying doing so will help it stabilise inflation over time. The 20 countries that share the euro currency have to submit their 2024 budget drafts for European Union inspection by Oct. 15.
The dollar scaled a 10-month high on Wednesday, pushing the euro and sterling to six-month lows and keeping the yen deep in intervention territory, as the prospect of higher-for-longer U.S. rates gripped markets. Minutes of the Bank of Japan's July meeting released on Wednesday showed that policymakers agreed on the need to maintain ultra-loose monetary settings but were divided on how soon the central bank could end negative interest rates.
The dollar scaled a 10-month high against its major peers on Wednesday, pushing the euro and sterling to 6-month lows and keeping the yen deep in intervention territory, as the prospect of higher-for-longer U.S. rates gripped markets. U.S. Treasuries stabilised after their recent heavy selloff, though yields remained near 16-year peaks, keeping the greenback solidly bid.
The U.S. dollar index (DX-Y.NYB) has shown a 5% increase over the last 2 months despite the Federal Reserve's recent interest rate announcement, a looming government shutdown, and increased geopolitical tensions. Former U.S. Vice President Mike Pence (R) joined Yahoo Finance to outline his disagreements with The Fed and recent economic policies from the Biden administration. Yahoo Finance's Jared Blikre breaks down the comments made by the former vice president and how the dollar is performing despite economic headwinds. For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
With expanding EURC stablecoin to Stellar, Circle expects to boost European remittance channels, cross-border payments, treasury management and aid disbursement.
The rouble firmed against the euro on Monday while trading little changed against the dollar, in a week when companies' need for roubles to settle end-of-month tax payments should lend the Russian currency some support. At 1452 GMT, the rouble was steady against the dollar at 96.24 and had gained 0.6% to trade at 101.98 versus the euro. On global forex markets, the euro was at its weakest since March 16 against the dollar, reflecting views that the European Central Bank is unlikely to raise rates further, whereas the Federal Reserve set out a hawkish rate outlook last week.
The central banker said she wanted to address “conspiracy theories” about government snooping
The British Pound (GBP) concluded last week on a downbeat note due to a significant contraction in the U.K.'s service sector, which accounts for over 70% of the country's GDP, according to recent surveys. The downturn has heightened recession fears and led to speculations that the Bank of England (BoE) may have ended its cycle of interest rate increases.
The pound dipped to its lowest in six months against the dollar and its weakest in four months against the euro on Monday, as jitters across asset classes hurt the currency already bruised by markets' reevaluation of the Bank of England's rate outlook. Market pricing prior to that meeting had reflected expectations that a further 25 basis point rate hike was all but certain for 2023, if not at that specific meeting, but, on Monday, expectations for a further rate hike this year were roughly 40%. That underscored a reversal of the trend earlier this year when the pound had been boosted by expectations that the Bank of England would keep raising rates longer than the European Central Bank and the Federal Reserve.
Egypt has agreed with the International Monetary Fund (IMF) to merge the first and second reviews of its economic reform program, following delays in the first review due to questions over the country's progress in meeting IMF's terms. The announcement was made by Egypt's Finance Ministry on Monday, as reported by local media.
The Pound (GBP) experienced further losses on Friday, rounding off a challenging week marked by a deepening contraction in the U.K.'s service sector activity, according to the latest survey. This development has intensified recession fears and fueled expectations that the Bank of England (BoE) has concluded its interest rate hikes.
Pablo Hernandez de Cos, a member of the European Central Bank's (ECB) Governing Council, stated on Monday that keeping current borrowing costs stable could help Euro-area inflation align with the ECB's 2% target. This strategy is designed to strike a balance between avoiding insufficient tightening, which may obstruct reaching the inflation goal, and excessive tightening that could potentially harm economic activity and employment.
Last week, the European Central Bank raised rates by a quarter of a percentage point to 4%, but suggested that they will be done with rate increases for a bit. ECB Chief Economist Philip Lane tells Yahoo Finance that the 4% interest rate "is going to do quite a bit in bringing inflation all the way back to our 2% target." However, Lane notes that there is still a lot of uncertainty and though "we do think that this 4% will do a lot," that rate needs to held long enough to bring inflation down. Lane also cautions that the bank remains data dependent. Lane also tells Yahoo Finance's Jennifer Schonberger that "the overall environment remains... not fragile." "The banking system is in good shape. Because of the pandemic, household balance sheets look in better shape than normal. Same for corporates. So the kind of toxic mix... you need in order to kind of trigger a deep recession is not present," Lane says. For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Wednesday’s statement and press conference of the FOMC hinted that another hike is possible before the end of the year.