Dollar Steadies Amid Federal Reserve Divides and Global Currency Fluctuations
The dollar remained stable, nearing a three-month high, as Federal Reserve divisions led traders to pull back interest rate cut wagers. Global currency shifts, including a softer yen and a steady Australian dollar, are influenced by economic data and central bank decisions amidst a U.S. government shutdown.
The U.S. dollar held steady on Tuesday, hovering around its three-month peak as the market digested signals from a divided Federal Reserve. The central bank's mixed messages caused traders to reassess the likelihood of upcoming interest rate cuts. Meanwhile, investors awaited the Australian central bank's decision, with expectations that it will maintain its current rates.
In currency markets, the yen weakened to 154.38 per U.S. dollar, nearing an eight-and-a-half-month low last seen the previous week. This drop sparked concerns in Tokyo about potential market interventions. Last week's rate cut by the Fed, hinted by Chair Jerome Powell to be the year's last, has reshaped traders' expectations. The probability of another cut has decreased from 94% to 65%, according to CME FedWatch data, strengthening the dollar further.
The dollar index edged up 0.1% to 99.99, reflecting its three-month high. With government data on hold due to the U.S. shutdown, investors are turning to non-governmental economic indicators to evaluate the economy's health. ADP employment data and the Institute for Supply Management survey highlight challenges in the manufacturing sector, which contracted for the eighth consecutive month. Meanwhile, Australia's currency remained stable at $0.6535 as the RBA held rates, influenced by recent high inflation figures.
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