Dollar drifts, Aussie gains on prospect of rate hike By Reuters

By Ankur Banerjee and Stefano Rebaudo

(Reuters) -The U.S. dollar was somewhat little connected Tuesday, but still wrong striking region of its three-month high, while nan Australian dollar roseate aft nan cardinal slope said a complaint hike whitethorn beryllium needed to tame inflation.

The Reserve Bank of Australia (RBA) connected Tuesday near rates unchanged, but cautioned astir a imaginable further monetary tightening.

Investors person steadily pushed backmost bets for nan first complaint trim from nan RBA to August, alternatively than June, pinch economists polled by Reuters besides expecting nan cardinal slope to enactment dependable connected rates good into nan 2nd half of this year.

The roseate 0.35% to $0.6505, inching distant from nan 2-1/2 period debased of $0.6469 it touched connected Monday. The New Zealand dollar was 0.13% higher astatine $0.6063.

The repricing of nan RBA monetary way “helps to supply humble support for nan Australian dollar successful nan near-term,” said Lee Hardman, elder rate analyst, astatine MUFG.

“Sentiment towards nan Aussie has besides been boosted indirectly overnight by nan rebound successful nan Chinese equity marketplace wherever speculation is building complete further authorities argumentation action to supply stability,” he added.

The Aussie dollar is usually powerfully correlated to Chinese stocks, arsenic China is Australia’s largest trading partner.

Chinese stocks recorded their biggest one-day summation since 2022 connected Tuesday and nan yuan roseate connected a slew of signals that authorities are strengthening their resoluteness to support slumping markets.

A drawstring of robust U.S. economical information and remarks from Federal Reserve Chair Jerome Powell person quashed speculation of early and steep liking complaint cuts and supported nan dollar.

Traders person been scaling backmost complaint trim bets since nan opening of nan twelvemonth and are presently pricing successful only a 16% chance of a trim successful March, nan CME FedWatch instrumentality showed, compared pinch a 69% chance astatine nan commencement of nan year.

They are besides now pricing successful astir 115 ground points (bps) of cuts this year, compared pinch astir 150 bps of easing anticipated successful early January.

The , which measures nan U.S. rate against six others, eased 0.11% to 104.34, having touched 104.60 connected Monday, its highest since Nov. 14. The scale is up 3% for nan twelvemonth truthful far, aft dropping 2% successful 2023.

“There seems small inducement for investors and corporates to offload immoderate of their dollar holdings,” said Chris Turner world caput of markets astatine ING.

“There is besides nan looming China Lunar New Year vacation adjacent week, which whitethorn make nan marketplace reluctant to transportation short dollar positions successful an uncertain geopolitical environment,” he added.

The euro was up 0.16% astatine $1.0761%.

“German information are supporting nan azygous currency,” said Roberto Mialich, forex strategist astatine UniCredit.

“A imaginable repricing of nan ECB (European Central Bank) argumentation way towards a first complaint trim successful June alternatively of April, which we respect arsenic likely, would prop up nan euro successful nan mean term,” he added.

German business orders unexpectedly jumped successful December.

Investors will attraction connected nan ECB’s user expectations survey, owed later successful nan session, which could present hints astir nan disinflation process affecting expectations for policy.

Sterling past fetched $1.2558, up 0.18% connected nan day, but remained adjacent to Monday’s seven-week low.

The pound’s autumn connected Monday came contempt immoderate upbeat economical data. Figures showed that UK unemployment was apt overmuch little precocious past twelvemonth than antecedently thought, which could push retired British complaint cuts too.

The Japanese yen was stronger connected nan time astatine 148.57 per dollar, but not acold disconnected a two-month debased of 148.90 it touched connected Monday.

Japan’s existent wages fell for a 21st consecutive month, though astatine a slower pace, while family spending dropped for a 10th consecutive month, showing ostentation outpaced costs betterment and continued to measurement connected user spending.