SINGAPORE, Dec 9 (Reuters) – The dollar eased on Friday
as worries over a slowdown in the United States mounted, with
traders on guard ahead of a slew of central bank meetings next
week, where the Federal Reserve takes centre stage.
Against the greenback, the euro rose nearly 0.5%
overnight and edged toward a six-month peak hit at the start of
the week. It was last 0.23% higher at $1.0579, and is on track
for a third straight week of gains.
Sterling similarly eked out a small gain overnight
and last rose 0.23% to $1.22695, not far off Monday’s six-month
high of $1.2345. The Japanese yen gained more than
0.4% to 136.04 per dollar.
The number of Americans filing new claims for jobless
benefits increased moderately last week, data showed on
Thursday, with the so-called continuing claims rising to a
10-month high in late November, adding to fears that the world’s
largest economy may enter a recession next year.
“We’ve got a very awkward outlook the next year, which is
playing into traders’ thought process. We’re looking…at much
lower growth globally, lower growth out of the U.S. as well,”
said Jarrod Kerr, chief economist at Kiwibank.
The U.S. dollar index fell 0.27% to 104.53, after
slipping 0.3% overnight.
It has fallen nearly 7% this quarter, putting it on track
for the largest quarterly decline since 2010.
“It’s (also) very much positioning at the moment,” Kerr
added, ahead of the Fed’s policy meeting next week.
Money markets are pricing in a 93% chance that the Fed will
raise rates by 50 basis points, with rates now seen peaking at
just below 5% in May.
Expectations that the Fed will scale back on the pace of its
interest rate hikes and that rates may not rise as high as
previously feared, have knocked the dollar more than 8%
off its two-decade peak against a basket of currencies hit in
September.
Yields on U.S. Treasuries have also slumped, with the
two-year yield, which typically reflects interest
rate expectations, last at 4.3035%, away from its 15-year high
of nearly 4.9% hit last month.
A closely watched part of the U.S. Treasury yield curve,
measuring the gap between yields on two- and 10-year Treasury
notes was inverted at -83.7 bps.
An inversion of this yield curve is typically a precursor to
recession.
The European Central Bank and the Bank of England will also
announce their monetary policy decisions next week, with markets
keenly watching for guidance on 2023’s outlook.
Elsewhere, the Aussie was up 0.4% at $0.6797, while
the kiwi gained 0.42% to $0.6407.
The antipodean currencies have been beneficiaries of China’s
recent easing of its stringent COVID restrictions, given that
they are often used as liquid proxies for the Chinese yuan.
Against the dollar, the offshore yuan rose more
than 0.2% to 6.9424.
“The China reopening theme is a big one, especially (coming)
from a low base,” said Christopher Wong, a currency strategist
at OCBC.
“Chinese assets were deeply oversold prior to the recent
rebound. More reallocation back to RMB-assets will support RMB.”
(Editing by Jacqueline Wong)
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