(Bloomberg) -- The dollar fell for a third day, while the Canadian dollar gained after domestic inflation accelerated faster than expected. The yen erased gains in the afternoon in New York after advancing earlier in the day on haven demand.
- The Bloomberg Dollar Spot Index dropped 0.2%
- “While now is the time to begin dialing back the restrictiveness of monetary policy, it remains to be seen how much further interest rates will decline or where they might eventually settle,” Federal Reserve Bank of Kansas City President Jeff Schmid said Tuesday in prepared remarks
- Earlier Tuesday, haven assets, including the yen and Swiss franc, advanced as Ukraine launched an attack on Russian soil with US missiles, while Moscow broadened its guidelines on the potential use of nuclear weapons
- USD/JPY was little changed after jumping as much as 0.9% earlier
- “Once the US signaled there would not be a formal response to Russia’s expanded nuclear doctrine, traders began to treat this as a new phase of the war rather than an outright escalation,” said Helen Given, a foreign-exchange trader at Monex. “Putin has been jawboning on the potential use of nuclear weapons for quite some time now, and it remains quite unlikely that such an action will be taken”
- USD/CHF was trading near flat at 0.8827, falling earlier as much as 0.3%
- USD/CAD fell 0.3% to 1.3970
- Domestic inflation accelerated faster than forecast, which may dissuade policymakers from a second straight half-point rate cut next month
- “This has driven USD/CAD below the 1.40 threshold as the market prices out some possibility of outsized cuts,” said Sarah Ying, head of foreign-exchange strategy at CIBC Capital Markets.
- She added that “it’s a tad early to settle the debate between 25 and 50 just yet.”
- “Our official forecasts are still looking for an outsized cut, contingent on the upcoming data,” she said
- AUD/USD jumped 0.4% at 0.6531, leading gains against the greenback in the Group of 10
- Reserve Bank of Australia sees its current policy settings as appropriate to try to pull down core inflation that is still “too high,” according to minutes of its Nov. 4-5 policy meeting
Reporting by Vassilis Karamanis
