U.S. Dollar Weakens As Treasury Yields Drop On Dovish Fed Comments
October 10 2023 - 4:33AM
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The U.S. dollar fell against its most major counterparts in the
European session on Tuesday amid a drop in treasury yields, as
dovish comments from Federal Reserve officials lowered expectations
for further interest rate hikes.
Top Fed officials cautioned on raising rates further and
highlighted the financial tightening from the recent rise in
treasury yields.
Fed Vice Chair Philip Jefferson said on Monday that the central
bank is "in a position to proceed carefully in assessing the extent
of any additional policy firming that may be necessary."
"Higher term premiums result in higher term interest rates for
the same setting of the fed funds rate, all else equal. Thus, if
term premiums rise, they could do some of the work of cooling the
economy for us, leaving less need for additional monetary policy
tightening," Dallas Fed President Lorie Logan said.
Money markets currently assign a 70.5% probability that the Fed
will hold rates steady in December.
The greenback touched 0.9034 against the franc and 1.2275
against the pound, setting nearly 3-week lows. The greenback is
poised to find support around 0.87 against the franc and 1.25
against the pound.
The greenback was down against the euro, at nearly a 2-week low
of 1.0611. If it drops further, it may find support around the 1.07
area.
The greenback fell back to 1.3577 against the loonie, heading to
pierce its previous 8-day low of 1.3569. Next key support for the
currency is likely seen around the 1.32 level.
In contrast, the greenback climbed to 0.6391 against the aussie
and 0.5999 against the kiwi, from an early 8-day low of 0.6433 and
nearly a 2-week low of 0.6041, respectively. The currency is seen
facing resistance around 0.62 against the aussie and 0.57 against
the kiwi.
The greenback recovered to 149.09 against the yen, reversing
from an early 1-week low of 148.16. On the upside, 155.00 is seen
as its next resistance level.
U.S. wholesale inventories for August will be published in the
New York session.
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