Dec 1 (Bloomberg) - The dollar traded little changed as traders await Federal Reserve Chair Jerome Powell’s comments later Friday. The Canadian dollars was among the best performers in the Group of 10 after the domestic labor market beat projections with job gains. The euro fell the most in the group against the greenback.
- The Bloomberg Dollar Spot Index was little changed at 1239.30, following biggest monthly decline in a year
- “The USD is ending the week and starting the month somewhat on the defensive versus most major currencies,” Shaun Osborne, chief foreign-exchange strategist at Scotiabank, wrote. “Despite yesterday’s recovery in the USD, headwinds — lower yields specifically but seasonal trends in December and broadly bearish technicals — all suggest more USD softness ahead in the next few weeks and perhaps beyond”
- Helen Given, an FX spot trader at Monex USA, says the index could close the year about 1% higher from where it is now, though sees it dropping 3% to 4% through the second quarter in 2024
- “The situation the US faces, especially with respect to the Fed’s path forward next year, still remains less dire than many of its peers and the larger picture of the domestic economy remains relatively strong,” she said
- USD/CAD extended declines after the release of Canadian labor data for November, falling 0.4% to 1.3509, the lowest level since end of September
- “Both the headline job gains and the mix were good,” said Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. “Markets are pricing in imminent Bank of Canada rate cuts but I think the jobs data warrant some caution”
- EUR/USD fell 0.4% to 1.0843, its third day of declines
- NZD/USD little changed at 0.6158 after rising 0.6% earlier; New Zealand’s central bank can’t afford to ignore a surge in immigration, even though it’s expected to subside next year, because inflation has been above target for so long, Deputy Governor Christian Hawkesby said
- The Reserve Bank of New Zealand kept key interest rate as expected earlier in the week, but “guidance was more hawkish than we had anticipated”, said Bank of America rates strategist Oliver Levingston and Micaela Fuchila
- “After a RBNZ-led selloff, we recommend buying AUD/NZD as a proxy for tighter rate differentials,” they wrote
Weaker data out of Australia, further rate increases by the central bank in New Zealand would be a risk to this trade
- Some information comes from FX traders familiar with the transactions who asked not to be identified because they aren’t authorized to speak publicly
Reporting by Anya Andrianova and Vassilis Karamanis
