DOLLAR

By Reuters

The dollar held steady against most currencies on Wednesday as traders braced for U.S. data expected to show a slowdown in durable goods orders and a key speech by Federal Reserve Chairman, Jerome Powell.

The yuan rose toward a seven-month high after U.S. and Chinese trade officials reaffirmed their commitment to a Phase 1 trade deal, which eased concerns about a diplomatic standoff between the world’s two-largest economies.

The greenback took a hit after data on Tuesday showed U.S. consumer confidence tumbled to the lowest in more than six years due to concerns about coronavirus-induced job losses.

Traders will look to Powell’s speech on Thursday at the annual Jackson Hole retreat to determine what steps the Fed is willing to take to safeguard a fragile economic recovery.

“I expect Powell to use forward guidance to send a dovish message that rates will remain low for a long time, which feeds into dollar weakness,’’ said Minori Uchida, head of global market research at MUFG Bank in Tokyo.

“You could say we are in a long-term correction of excessive dollar strength.’’

Against the euro, the dollar stood at $1.1816 on Wednesday following a 0.4 per cent decline in the previous session.

The British pound bought $1.3138 having risen 0.7 per cent against the dollar on Tuesday.

Sterling has managed to shrug off a lack of progress in trade negotiations between Britain and the European Union.

The dollar bought 0.9090 Swiss franc, close to the lowest in more than five years against the safe harbour currency.

The dollar was locked into a narrow range against the yen, last trading at 106.43.

Powell’s speech at Jackson Hole – held online due to the coronavirus outbreak – is by far the biggest event of the week, but the data calendar leading up to Thursday has been discouraging.

Data later on Wednesday is forecast to show growth in U.S. durable goods orders slowed in July, following from the U.S. consumer confidence report for August.

The U.S. consumer confidence fell to the lowest since May 2014, highlighting policymakers’ concerns about the economy.

The onshore yuan rose to 6.9002 per dollar, approaching a seven-month high after Washington and Beijing affirmed their trade deal.

The mood also brightened after Ant Group, Alibaba’s fintech arm and China’s dominant mobile payments firm, filed for a dual listing in Hong Kong and Shanghai to raise as much as $30 billion in what would be the world’s largest initial public offering.

The Australian dollar was little changed at $0.7195 as traders monitor a coronavirus outbreak in the state of Victoria.

The New Zealand dollar last bought $0.6552.

By Reuters 

The dollar inched ahead on Wednesday, as a jump in U.S. yields pushed it higher against the Japanese yen, while the kiwi briefly hit a one-month low after the central bank extended its bond-buying programme. 

The yield on 10-year U.S. debt, which rises when bond prices fall, made its steepest gain in two months on Tuesday ahead of the largest ever 10-year auction later on Wednesday. 

That triggered a wave of gold selling, which deepened in Asia, and it has pressured the yen as better returns on U.S. debt lures investment from zero-yielding Japan. 

The yen fell 0.24 per cent to 106.76 per dollar, its lowest since July 24. 

The tumbling gold price, which has dropped roughly seven per cent in two days, also dragged on the Australian dollar since Australia is the world’s second-biggest gold producer. 

The Aussie fell 0.35 per cent to $0.7120 while the New Zealand dollar fell 0.5 per cent to $0.6547. 

Elsewhere in financial markets, the focus was on the political holdup in Washington over a new stimulus package, which capped broader investor sentiment. 

The jump in yields was driven by both repositioning ahead of big debt issuance this week and a sense that the global recovery is looking broader and more robust – a mood helped somewhat by Russia hailing the approval of a COVID-19 vaccine. 

“Investors have been positioning themselves to buy back dollars they had sold against the yen,’’ said Mitsuo Imaizumi, chief FX Strategist at Daiwa Securities. 

Imaizumi added that a short squeeze was seen as the U.S. yields spiked. 

Against a basket of currencies, the dollar extended a bounce made last Friday as U.S.-China tensions ratcheted higher with President Donald Trump’s ban on TikTok and WeChat. 

It last sat at 93.846. Against the euro, the greenback was a tad firmer at $1.1718 and against the pound it extended Tuesday gains that followed a weak British jobs report to hit $1.3021 per pound. 

The dollar index has slumped nine per cent from a three-year high it hit in March and lost four per cent in July alone. 

The leaves investors divided over whether the support the greenback has found in August amounts to a bounce or a pause in its decline. 

In New Zealand, the central bank kept rates on hold, as expected. 

But it surprised markets a little by extending the duration of its bond-buying programme, flagging an increase in purchases next week, and putting a little more emphasis on the possibility of negative rates in the future. 

“Taken together, that’s why interest rates have fallen a few basis points and why the kiwi fell,’’ said Westpac FX analyst, Imre Speizer. 

“That’s a modest dovish reaction.’’ 

Ten-year New Zealand government debt was last down about five basis points, reflecting a small drop across the curve and the kiwi recovered slightly from a one-month low $0.6524. 

On the horizon are U.S. inflation figures due at 1230 GMT, which are expected to show consumer price growth drift down to 1.1 per cent on a year-on-year basis from 1.2 per cent in June. 

Investors are also looking for signs that the political impasse in Washington over the next stimulus programme can be overcome, with the stalemate weighing on U.S. equities as Democrats and Republicans blamed each other for the deadlock.