Forex

The Bloomberg Dollar Spot Index fell 0.7% for the week, though losses narrowed after strong US payrolls data on Friday lifted the implied odds of a September Fed rate hike to about 60%. The yen outperformed, rising about 2.4% against the dollar for its best week since July. Gains were driven by expectations that the Bank of Japan may raise its benchmark rate by a quarter point this month and keep the door open to faster hikes thereafter.

Fed Governor Christopher Waller is set to speak, and he is expected to underscore that a rate hike remains likely ahead of the September 16 FOMC meeting unless incoming data turn unexpectedly dovish. Markets have shifted to a new baseline that the Fed will raise rates in September, keeping the dollar steady after earlier gains. USD/JPY is expected to stay elevated around 160-162 on the hawkish outlook, while the Bank of Canada is seen holding rates at 2.25% as core inflation remains well anchored.

The Malaysian ringgit opened weaker against the US dollar on Wednesday at 4.0380/0445. Analysts linked the move to Brent crude rising to US$95.46 a barrel, which has lifted inflation worries and pushed market pricing for a US Federal Reserve rate hike at the September meeting to 65%. The US dollar index (DXY) was up 0.25% at 99.677 points, adding pressure on the ringgit, according to Bernama.

Sterling fell below 1.3550 versus the US dollar on Tuesday, down 0.4% on the day. The US dollar index rose 0.3% after February CPI increased 3.1% year-on-year, exceeding expectations. UK inflation has eased from peak levels but remains above the Bank of England’s 2% target, limiting room to cut rates. Markets are pricing a 60% chance of a 25-basis-point BoE cut in May, though that could shift if inflation stays sticky.

Kazakhstan’s central bank said it sold foreign exchange worth 374 billion tenge, or about $809 million, in August to hedge gold purchases. It said it will continue selling the same amount in September. The sales are intended to offset exchange-rate risks stemming from its gold purchases, according to Jin10.

Eurozone inflation data came in below expectations, with headline inflation easing to 2.2% from 2.4% and core inflation slowing to 2.7% from 2.9%. The softer readings suggested price pressures are fading faster than markets had anticipated. The euro weakened against sterling, at one point falling 0.4% to around 0.84, a multi-month low, reinforcing bets that the European Central Bank could accelerate rate cuts.

The euro rose 0.15% against the U.S. dollar during Monday’s European session, trading near 1.1600 as the greenback pulled back. Germany’s preliminary CPI accelerated to 2.4% year on year and the harmonized CPI rose to 2.6%, both higher than the prior readings and above market expectations. The figures strengthened the outlook for a tighter European Central Bank policy stance.

The euro fell to a two-week low against the U.S. dollar on Tuesday as the greenback strengthened. Recent U.S. retail sales and inflation data have prompted markets to reprice Federal Reserve expectations, with traders pushing back the timing of a first rate cut. The U.S. dollar index (DXY) rose 0.4% on the day. If the Fed keeps rates high while the European Central Bank shifts toward easing, the dollar could stay firm and weigh on multinational earnings.

The yen fell to 160.20 per dollar after the Federal Reserve chair signaled openness to raising interest rates, pushing up U.S. Treasury yields and the dollar. Japan has already spent a record $98.7 billion intervening to support the currency, but the yen remains under pressure. Japan’s 10-year government bond yield rose to a fresh 30-year high of 2.95% the same day. Markets are watching the upcoming G20 finance chiefs meeting for possible U.S. pressure on Japan to keep fiscal discipline and for the BOJ to raise rates.

Thailand’s baht and gold prices rose to their highest levels in nearly three months as sentiment toward the U.S. dollar stayed weak. The U.S. Treasury’s debt buyback operation failed to ease market worries about rising national debt and persistent fiscal deficits, leaving the dollar hovering near multi-month lows. The baht touched 32.85 per dollar on Monday, while spot gold climbed to $4,346.36 an ounce, its highest since mid-May.