The U.S. dollar remained steady on Tuesday as traders assessed the latest developments in the Middle East and prepared for upcoming speeches from central bank officials. Meanwhile, the pound experienced a dip in value following data suggesting a weakening labor market.
Although the yen briefly surged, it quickly trimmed its gains and was last seen at 149.47 per dollar. Investors closely monitored any signs of intervention from Japanese authorities as the yen approached the 150 level, at which officials had previously stepped in to buy the currency last year.
Masato Kanda, Japan’s top financial diplomat, stated that despite its recent weakness, the yen is still considered a safe haven asset like the dollar and the Swiss franc. He also noted that demand for the yen has increased due to the ongoing conflict in the Middle East.
Valentin Marinov, the global head of G10 FX research and strategy at Credit Agricole CIB, highlighted that tensions in the Middle East and elevated global bond yields continue to be the main drivers in the broader currency markets. He expressed concern about the potential for further escalation and its impact on oil prices and inflation.
The dollar index, which measures the U.S. currency against six major peers, dropped 0.1 percent to 106.13 after a 0.4 percent decrease on Monday.
Investors are eagerly awaiting Federal Reserve Chair Jerome Powell’s speech on Thursday, as well as other speeches by regional bank heads throughout the week. Federal Reserve officials will enter a blackout period on October 21 ahead of the central bank’s meeting on October 31-November 1.
Patrick Harker, President of the Federal Reserve Bank of Philadelphia, emphasized on Monday that the central bank should not raise borrowing costs, as it could create additional pressure on the economy.
Valentin Marinov of CA CIB commented on the recent labor market data, stating that it indicated a cooling down, adding weight to the belief that the Bank of England is unlikely to increase interest rates any further.
The pound was last valued at $1.2174, experiencing a 0.4 percent decline on the day, following a 0.6 percent increase on Monday.
The New Zealand dollar saw a 0.6 percent drop to $0.5898 after data revealed that consumer inflation had reached a two-year low. This lowered expectations of a cash rate hike by the central bank in November.
In contrast, the euro rose 0.1 percent to $1.0569, supported by better-than-expected German investor morale in October, according to the ZEW economic research institute.
The Australian dollar also gained 0.2 percent, reaching $0.6357. Minutes from the Reserve Bank of Australia’s October 3 policy meeting revealed that the central bank had considered raising rates but concluded that there was insufficient new information to justify a move.
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