Dollar catches breath as Fed officials leave market pondering over rates path
Shafaq News / The dollar hovered below a near two-decade high in Asian trading on Friday, having slipped overnight after two Federal Reserve policymakers said they favoured a smaller rate rise than the 100 basis points (bps) that investors were betting on.
The dollar index, which measures the currency versus six counterparts, edged 0.03% higher to 108.60, after reaching and then falling back from the highest since September 2002 at 109.29 on Thursday.
Traders had ramped up bets that the Fed would go for a super-sized tightening at their July 26-27 meeting after data on Wednesday showed consumer price inflation racing at the fastest pace in four decades.
But those bets were pared after Fed Governor Christopher Waller and St. Louis Fed President James Bullard both said they favoured another 75 bps hike for this month, in spite of the inflation figures.
Fed funds futures currently indicate a 36% chance of a 100 bps increase, down from around 70% before the comments.
Even with the pullback, the dollar index is on track for a third winning week, up 1.58% from last Friday on both bets for an increasingly aggressive Fed and as worries about a resulting recession fuelled demand for the currency as a safe haven.
Against the yen, the dollar was flat at 138.98 , keeping it on track for a 2.1% gain this week. It touched 139.38 overnight for the first time since September 1998 as U.S. Treasury yields widened the gap to their Japanese counterparts.
The Bank of Japan has been steadfast in its commitment to ultra-easy policy to support the tepid economy, and is widely seen keeping stimulus settings steady at a meeting next week.
(Reuters)
