NEW YORK: The dollar was slightly lower in choppy trading on Thursday, erasing most of its early session losses as investors bet the Federal Reserve will begin reducing its asset purchases next month and focus on raising interest rates. will go on time.
The greenback had recovered since early September on expectations of the US central bank and monetary policy tightening more rapidly than previously expected amid a recovery in the economy and rising inflation.
But the dollar reversed Wednesday, even after minutes of the Fed’s September 21-22 policy meeting confirmed that a tapering of stimulus is likely to begin this year and data showed that pricing pressure is still affecting US consumers. was killing
“I think what we’ve seen in the last day or two is a little bit of profit taking,” said Sean Osborne, chief forex strategist at Scotia Capital.
“I don’t think it is close to a significant reversal in the dollar trend at this point in time, and in fact, I think what we saw today could be a sign that the corrective rally that we have seen in the past or Two days have probably run their course,” he said.
The market is expecting the Fed to begin reducing its asset purchases as early as next month, and the wind-down of the massive bond-buying program will happen fairly quickly, Osborne said.
“It seems to be moving somewhat in terms of when and how quickly the Fed is going to raise interest rates, so that’s another potential positive for the dollar,” he said.
At 3:25 p.m. EDT, the dollar index was down 0.036% at 93.982, having climbed back from a 10-day low of 93.754 in the prior session. On Tuesday, the greenback reached a one-year high of 94.563.
The euro was flat against the dollar at $1.15955, falling overnight from a nine-day high, while the British pound was up 0.15% against the dollar at $1.36815.
While a return to risk appetite could dampen demand for the safe-haven greenback, US equity markets posted solid gains on upbeat earnings, said Vasily Serebryakov, FX and macro strategist at UBS.
Thursday’s data showed the number of Americans filing new claims for unemployment benefits fell sharply last week to the lowest level since mid-March 2020.
In another report, the Labor Department said its producer price index for final demand increased, but on a monthly and year-on-year basis, the increase was lower than economists expected by Reuters.
The Australian dollar, which is seen as a liquid proxy for risk appetite, rose 0.47% to $0.7414 against the dollar, its highest level since September 7.
The New Zealand dollar also gained 0.93% to $0.7030, its highest mark in 2-1/2 weeks.
Elsewhere, cryptocurrency bitcoin was up 0.13% at $57,451. It had hit a five-month high of $58,550 in the previous session.
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