Greenback slumps against euro
Dollar reaches two-week low against the euro amid speculation the Federal Reserve will refrain from lifting its benchmark rate.
|||Sydney - The dollar reached a two-week low against the euro amid speculation the Federal Reserve will refrain from lifting its benchmark rate at the end of a policy meeting on Thursday.
The greenback fell against most major peers last week as a report showed flat US producer prices. Consumer price data due on September 16 will probably show a drop for August. The yen was little changed ahead of a Bank of Japan meeting Tuesday as more than a third of economists polled predicted policy makers will increase monetary stimulus by the end of October.
“It’s hard to justify that a US rate hike is the right move at this time,” said Derek Mumford, director at Rochford Capital in Sydney. “There could be some squaring of positions prior to the decision and keep the US dollar certainly from going higher.”
The dollar fell 0.1 percent to $1.1344 per euro as of 12.12pm in Tokyo. It fell to as low as to $1.1359, the weakest since August 27. The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.1 percent to 1,203.16 after completing its first weekly decline since August.
The yen was little changed at 120.47 per greenback from 120.59 on Friday and 136.67 against the euro.
Fed chance
Futures show a 28 percent chance the Federal Open Market Committee will announce a rate increase on September 17. The probability was 38 percent on August 31. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.
The US consumer price index fell 0.1 percent in August after a 0.1 percent gain the month before, economists surveyed by Bloomberg forecast a Labour Department report to show on Wednesday. That would be the first negative reading since January.
The yen has climbed 6.3 percent in the past three months, the most among its peers in Bloomberg Correlation-Weighted Indexes, as equity markets fell and concern deepened about slowing global growth. The euro is up 4.3 percent while the dollar has climbed 3.5 percent.
The BOJ will maintain its policy stance at a meeting on Tuesday, according to all but two of 35 analysts polled by Bloomberg. The central bank will expand easing on October 30, said 11 economists in the Bloomberg survey taken from September 7-10. Of the total respondents, 13 said they don’t expect any stimulus at all.
BOJ action
“We have the Bank of Japan and some speculation that they could be easing, not necessarily this week but in October, keeping pressure on the Japanese yen,” said Sue Trinh, head of Asia foreign-exchange strategy at Royal Bank of Canada in Hong Kong.
Hedge funds and other large speculators trimmed bets on yen weakness versus the dollar for a fourth straight period. The difference in the number of wagers on a drop compared with those on a gain - net shorts - was 6,662 on Sept. 8, from 15,555 a week earlier, according to data from the Washington-based Commodity Futures Trading Commission.
“Positioning in euro and yen has been steadily declining,” Sam Tuck, senior currency strategist at ANZ Bank New Zealand in Auckland. “That’s more reflective of the risk period that we’ve seen in the market.”
BLOOMBERG