* U.S. dollar down 0.7% against Canadian dollar* U.S. dollar index down 0.2%* Canadian dollar appreciates to $1.2310 * Aussie still up a
* U.S. dollar down 0.7% against Canadian dollar
* U.S. dollar index down 0.2%
* Canadian dollar appreciates to $1.2310
* Aussie still up after jumping on inflation data
(New throughout, updates prices, market activity; new byline,
changes dateline, previous LONDON)
By David Henry and Elizabeth Howcroft
NEW YORK/LONDON, Oct 27 (Reuters) – The U.S. dollar lost
value against major currencies on Wednesday as the Bank of
Canada started off a series of awaited central bank policy
comments with a hawkish tone.
The moves broke a calm that had settled over the currency
markets this week and took the U.S. dollar index down
0.2% to 93.759.
The greenback lost 0.7% to the loonie, which traded for
$1.2310 at 1432 GMT.
“You’re going to see more FX volatility and swings here,”
said Ed Moya, senior market analyst at broker OANDA.
Traders will have different expectations for inflation in
each region, Moya said, adding: “Interest rate differentials are
going to be really hard to calculate for some currencies.”
The Bank of Canada said it now expected slack in the economy
to be absorbed in the “middle quarters” of 2022, signaling rates
could rise months sooner than previously forecast.
Before the announcement, the Canadian dollar had weakened to
its lowest level in nearly two weeks against its U.S.
counterpart.
The comments from the Bank of Canada could trigger new
assessments of how interest rates will change and impact
currencies as central bankers try to support the pandemic
recovery without unleashing sustained inflation.
Currency markets had moved little in the first two days of
this week as traders paused for monetary policy announcements
from major central banks around the world, including the U.S.
Federal Reserve, which meets next week.
For much of the day, the euro traded within 0.2% of its
Tuesday close against the dollar. The euro was last up about
0.2% to $1.1614.
The European Central Bank meets on Thursday and is expected
to take a dovish stance.
The German government cut its 2021 growth forecast for this
year, as supply bottlenecks for semiconductors and rising energy
costs delay recovery in Europe’s largest economy.
Germany’s 10-year bond yield fell to its lowest in more than
a week and its yield curve flattened.
Similarly, the U.S. yield curve flattened with the spread
between yields on two- and 10-year Treasuries narrowing to fewer
than 105 basis points, the least in over a month.
The 10-year yield dipped below 1.56% on Wednesday. It had
reached 1.70% last week.
Flattening yield curves in developed markets this week may
reflect concern, analysts say, that central banks will error if
they tighten policy too early in the face of higher inflation
that proves temporary.
The Australian dollar up 0.2% to $0.7514 after having gained
0.4% after data showed that Australian core inflation sped to a
six-year high in September, surprising the market. The data
prompted a spike in short-term yields.
The Reserve Bank of Australia meets on Tuesday of next week
and market pricing is at odds with RBA policymakers’ insistence
that there will be no rate hikes before 2024.
Against Japan’s yen, the U.S. dollar was down 0.4% to
13.6750 – still within recent ranges and close to the four-year
high of 114.695 the dollar touched against the yen one week ago
.
The Bank of Japan meets on Thursday and is widely expected
to downgrade its economic assessment. Markets have been betting
on no rate hike in the foreseeable future.
The British pound was down 0.2% to $1.3733 after the U.K.
finance minister unveiled Britain’s budget forecasts..
In cryptocurrencies, bitcoin fell to as low as $58,100 – its
lowest in a week and a half – in a move attributed to
profit-taking following the all-time high of $67,016 it reached
last week. Since that high, the cryptocurrency has fallen more
than 13% but was on track for its best month since February.
=======================================================
Currency bid prices at 10:32AM (1432 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 93.7590 93.9560 -0.20% 4.199% +94.0110 +93.6910
Euro/Dollar $1.1614 $1.1597 +0.16% -4.94% +$1.1626 +$1.1585
Dollar/Yen 113.6750 114.1450 -0.40% +10.03% +114.2150 +113.3850
Euro/Yen 132.01 132.34 -0.25% +4.01% +132.5200 +131.5900
Dollar/Swiss 0.9177 0.9199 -0.23% +3.73% +0.9204 +0.9165
Sterling/Dollar $1.3733 $1.3765 -0.21% +0.53% +$1.3780 +$1.3711
Dollar/Canadian 1.2310 1.2395 -0.69% -3.33% +1.2431 +1.2300
Aussie/Dollar $0.7514 $0.7502 +0.17% -2.31% +$0.7536 +$0.7489
Euro/Swiss 1.0656 1.0666 -0.09% -1.40% +1.0673 +1.0637
Euro/Sterling 0.8454 0.8419 +0.42% -5.40% +0.8464 +0.8419
NZ $0.7165 $0.7163 -0.03% -0.29% +$0.7183 +$0.7132
Dollar/Dollar
Dollar/Norway 8.3875 8.3670 +0.21% -2.36% +8.4265 +8.3615
Euro/Norway 9.7415 9.7008 +0.42% -6.93% +9.7661 +9.6922
Dollar/Sweden 8.5825 8.6068 -0.14% +4.71% +8.6378 +8.5722
Euro/Sweden 9.9682 9.9824 -0.14% -1.07% +10.0020 +9.9631
(Reporting by David Henry in New York and Elizabeth Howcroft in
London; Editing by Christina Fincher, Barbara Lewis, William
Maclean)
www.lse.co.uk