FOREX-Dollar steadies as stocks slip

By Tom Westbrook

SINGAPORE, Dec 21 (Reuters)The dollar found a footing on Thursday as a sudden end to a strong rally for U.S. stocks had investors looking for safety and as an unexpected fall in British inflation hit the pound.

Sterling GBP=D3 suffered its sharpest drop in two months overnight after British inflation dived below forecasts to an annual 3.9% in October, its lowest for two years.

Traders scrambled to price rate cuts by May and the currency dropped 0.7% to $1.2638. GBP/

“The data suggests that inflation momentum in the United Kingdom is finally losing steam, allowing the Bank of England to join the global rate cutting cycle next year,” said analyst Marios Hadjikyriacos of brokerage XM.

Elsewhere heavy selling in the final hour of equities trade on Wall Street sent a ripple of risk-aversion through markets, lifting what had been an under-pressure greenback from lows.

The Australian and New Zealand dollars retreated from five-month highs. The Aussie AUD=D3 was last at $0.6714, having touched its highest since July at $0.6779 a day earlier. The kiwi NZD=D3 traded at $0.6257. AUD/

The euro EUR=EBS was stable at $1.0943. The yen JPY=EBS found support at 143.5 per dollar, after having lost ground on Tuesday when the Bank of Japan left its ultra-easy policy settings unchanged.

Currency markets’ next focus is on Friday’s release of the U.S. core personal consumption expenditure (PCE) index which is forecast by analysts to rise 0.2% in November with the annual inflation rate slowing to its lowest since 2021 at 3.3%.

Analysts suspect the balance of risk is on the downside and the slowdown in inflation means the Fed will have to ease policy just to stop real rates from rising.

But with 150 basis points of cuts already priced in next year, a massive rally in the bond market and the dollar index =USD down more than 4% from an early November high, some signs of caution are creeping in.

“Some adjustments in positions and paring back of risks ahead of (this) event…is only sensible,” said OCBC currency strategist Christopher Wong in Singapore.

“Liquidity is getting thinner as we get closer to the festive season, thin liquidity can exacerbate price movements on any data surprises.”

The dollar index, down 1% for the year so far, was steady at 102.37 in early Asia trade on Thursday. Ten-year U.S. Treasury yields US10YT=RR hit a seven-month low of 3.847% in New York.

China’s yuan CNH=D3 slipped on the rising dollar in overnight offshore trade, and as traders see no let up in China’s accommodative monetary stance.

It was steady at 7.1480 to the dollar on Thursday. CNY/

Bitcoin BTC=BTSP leapt briefly above $44,000 on Wednesday and was steady at $43,667 on Thursday.

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Currency bid prices at 0045 GMT

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=EBS

Dollar/Yen

JPY=EBS

Euro/Yen

EURJPY=EBS

Dollar/Swiss

CHF=EBS

Sterling/Dollar

GBP=D3

Dollar/Canadian

CAD=D3

Aussie/Dollar

AUD=D3

NZ Dollar/Dollar

NZD=D3

All spots FX=

Tokyo spots AFX=

Europe spots EFX=

Volatilities FXVOL=

Tokyo Forex market info from BOJ TKYFX

World FX rates https://tmsnrt.rs/2RBWI5E

(Reporting by Tom Westbrook.; Editing by Michael Perry)

((tom.westbrook@tr.com; +65 6973 8284;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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