Dollar tentative as investors assess rate-hike path

SINGAPORE — The U.S. dollar was steady on Monday as investors digested a clutch of economic data Financial Post Top Stories Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc. By clicking on the sign up button you consent to receive the above newsletter from Postmedia…
Dollar tentative as investors assess rate-hike path

SINGAPORE — The U.S. dollar was steady

on Monday as investors digested a clutch of economic data

Financial Post Top Stories

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released last week that stoked hopes of the Federal Reserve

slowing the pace of its interest rate hikes.

Data on Friday showed U.S. nonfarm payrolls rose by 223,000

jobs in December, while a 0.3% rise in average earnings was

smaller than expected and less than the previous month’s 0.4%.

There were further signs of an economy slowing down, with

the U.S. services industry activity contracting for the first

time in more than 2-1/2 years in December amid weakening demand.

That led the dollar index, which measures the U.S.

dollar against six major currencies, 1.15% lower on Friday. On

Monday, the index, which gained 8% in 2022, was 0.01% higher at

103.720.

Investors have pinned their hopes on the U.S. central bank

toning down its aggressive monetary tightening policy. Fed fund

futures now imply around a 25% chance of a half-point

hike in February, down from around 50% a month ago.

Analysts, however, point to the still tight labor market

that is likely to concern Fed officials.

“December’s payrolls report shows the U.S. jobs market

remains too tight to allow the Fed to step down to a 25 bps rate

hike next month,” said Mansoor Mohi-uddin, chief economist at

Bank of Singapore.

“We expect the Fed will stay more hawkish than the market

anticipates, keeping us cautious on the near-term outlook for

risk assets.”

With the next Fed meeting scheduled at the start of next

month, investors will focus on the consumer price index data due

on Thursday.

Citi said it expects another “softer” core CPI print with

some upside risk but said core inflation could pick up again in

early 2023.

“We continue to expect the Fed to hike by 50 basis points

in February as there are still strong underlying inflationary

pressures and further loosening in financial conditions would

likely not be a desirable outcome.”

Elsewhere, the Brazilian real had yet to trade after

supporters of far-right former President Jair Bolsonaro were

arrested after invading the country’s Congress, presidential

palace and Supreme Court.

The Japanese yen strengthened 0.12% versus the

U.S. currency to 131.94 per dollar, while sterling was

last trading at $1.2099, up 0.06% on the day, having gained 1.5%

on Friday.

The euro was up 0.11% at $1.0656, after closing

1.17% higher on Friday.

The Australian dollar rose 0.17% versus the U.S.

currency to $0.689, while the kiwi gained 0.02% to

$0.635.

========================================================

Currency bid prices at 0128 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.0660 $1.0645 +0.14% -0.51% +1.0668 +1.0640

Dollar/Yen 131.8650 132.0700 -0.13% +0.51% +132.2500 +131.7400

Euro/Yen

Dollar/Swiss 0.9275 0.9279 -0.03% +0.32% +0.9279 +0.9264

Sterling/Dollar 1.2104 1.2093 +0.12% +0.11% +1.2128 +1.2092

Dollar/Canadian 1.3432 1.3448 -0.10% -0.85% +1.3444 +1.3420

Aussie/Dollar 0.6891 0.6876 +0.28% +1.14% +0.6907 +0.6875

NZ 0.6348 0.6350 +0.01% +0.01% +0.6372 +0.6337

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Ankur Banerjee in Singapore; Editing by

Muralikumar Anantharaman)

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