Dollar Holds Gains Amid Anticipation of US Federal Reserve Decision
Translated & summarized from Panet by baba
The US dollar held its ground near a two-week high on Wednesday as markets awaited key central bank decisions, particularly from the US Federal Reserve. The New Zealand dollar fell sharply after its central bank unexpectedly kept interest rates unchanged, defying economists' predictions. Meanwhile, the Australian dollar saw a modest rise following inflation data, and the Israeli shekel weakened amid political uncertainty. Cryptocurrencies like Bitcoin and Ether experienced gains.
The story in 6 lines · by baba
- The US dollar maintained its strength ahead of anticipated monetary policy decisions from major central banks.
- The New Zealand dollar dropped significantly after its central bank unexpectedly held interest rates steady at 5.5%.
- Economists widely expected the Reserve Bank of New Zealand to raise interest rates, but it defied predictions.
- The Australian dollar edged up following inflation data showing a quarterly increase to 1.3%.
- The Israeli shekel depreciated by one percent due to renewed political uncertainty after inconclusive election polls.
- Bitcoin and Ether saw gains, rising 0.4% and 0.8% respectively.
The US dollar maintained its gains on Wednesday, reaching a two-week high as markets awaited monetary policy decisions from several central banks, including the US Federal Reserve. In contrast, the New Zealand dollar experienced a sharp decline after the country's central bank unexpectedly decided to keep interest rates unchanged. Most other major currencies showed little movement ahead of the Federal Reserve's announcement. The euro remained stable at $1.1124, while the British pound dipped 0.1 percent to $1.32945. The dollar fluctuated against the Japanese yen before settling at 157.945 yen.
The New Zealand dollar plummeted by up to 1.7 percent to a session low of $0.55831 after the Reserve Bank of New Zealand unexpectedly held its benchmark interest rate at 5.5 percent. A Reuters poll indicated that 22 out of 27 economists had predicted a rate hike. "The market mispriced it," said Mike Holohan, Director at Electus Financial in Auckland, suggesting the central bank might be avoiding political interference ahead of elections. However, the currency pared some losses after Reserve Bank of New Zealand Governor Anna Briman stated that the bank's monetary policy committee anticipates further official interest rate increases in upcoming meetings, potentially higher than previously indicated.
Thomas Matthews, Head of Markets, Asia-Pacific at Capital Economics in Wellington, commented that the Reserve Bank of New Zealand appears to have postponed, rather than abandoned, monetary tightening, and is likely to resume soon. He added that given the economic backdrop, market expectations seemed somewhat exaggerated and further easing surprises leading to more New Zealand dollar weakness are possible.
Meanwhile, the Australian dollar rose 0.1 percent to $0.70345 following data showing third-quarter inflation at 1.3 percent, up from 0.6 percent in the previous quarter. Reserve Bank of Australia Governor Michele Bullock informed lawmakers on Wednesday that the bank will discuss next week whether this year's four rate hikes are sufficient to return inflation to its target. Analysts at Westpac noted that the inflation data and Senate testimony are the last inputs before the RBA's monetary policy meeting, suggesting the team recommends a rate increase.
Traders are anticipating no change in the US Federal Reserve's policy, according to CME's FedWatch tool. Chris Weston, Head of Research at Pepperstone Group in Melbourne, stated that the Fed doesn't need to raise rates to move markets; altering the expected probability for a December hike would suffice. The dollar index, measuring the greenback against six major currencies, held steady at 102.40, near its highest level since October 14. The yield on the US 10-year Treasury note rose 2.2 basis points to 5.0112 percent.
Against the Canadian dollar, the US dollar climbed 0.1 percent to CAD 1.4063 ahead of the Bank of Canada's interest rate announcement, where a hike is expected to preempt inflation spread from the energy sector. The Israeli shekel depreciated by one percent amid renewed political uncertainty following inconclusive exit poll results. In cryptocurrency markets, Bitcoin rose 0.4 percent to $81,062.47, and Ether gained 0.8 percent to $2,360.81.