U.S. Dollar Advances As Yields Rise On Rate Uncertainty
January 03 2024 - 4:57AM
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The U.S. dollar firmed against its major counterparts in the New
York session on Wednesday, amid fading optimism about early
interest rate cuts by the Federal Reserve.
Risk-off mood prevailed in financial markets as doubts emerged
over just when the Fed plan to begin trimming rates in 2024.
Treasury yields rallied ahead of the release of the minutes amid
worries Fed officials will signal a more cautious approach to
future rate decisions.
Ahead of the release of the minutes, Richmond Federal Reserve
Tom Barkin said the U.S. economy heading for a soft landing is
"increasingly conceivable but in no way inevitable."
"The airport is on the horizon. But landing a plane isn't easy,
especially when the outlook is foggy, and headwinds and tailwinds
can affect your course," Barkin said in prepared remarks to the
Raleigh Chamber of Commerce: Launch 2024. "It's easy to oversteer
and do too much or understeer and do too little."
Barkin also noted the U.S. economy continues to defy
expectations, suggesting consumer spending is unlikely to pull back
as long as equity values are high and the labor market remains
tight.
"Longer-term rates have dropped recently, which could stimulate
demand in interest-sensitive sectors like housing," Barkin said.
"While you might think this would be a first-class problem, strong
demand isn't the solution to above-target inflation. That's why the
potential for additional rate hikes remains on the table."
The greenback advanced to fresh 2-week highs of 0.6227 against
the kiwi and 0.6717 against the aussie, off its early lows of
0.6276 and 0.6770, respectively. The greenback is poised to find
resistance around 0.60 against the kiwi and 0.64 against the
aussie.
The greenback moved up to near 2-week highs of 143.06 against
the yen and 1.3359 against the loonie, from its early lows of
141.85 and 1.3316, respectively. The greenback may find resistance
around 148.00 against the yen and 1.36 against the loonie.
The greenback appreciated to an 8-day high of 0.8554 against the
franc and more than a 2-week high of 1.0910 against the euro,
reversing from its early lows of 0.8488 and 1.0965, respectively.
The next possible resistance for the currency is seen around 0.91
against the franc and 1.06 against the euro.
The greenback recovered against the pound, with the pair trading
at 1.2628. On the upside, 1.24 is possibly seen as its next
resistance level.
Looking ahead, ISM manufacturing PMI for December will be
released in the New York session.
The Fed minutes from the December 12-13 meeting will be
published at 2 pm ET.
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