The dollar index stayed close to an almost two-month high hit overnight
The U.S. dollar rose to a 10-week high against the yen on Thursday as markets grew more confident about a patient approach by the Fed to further monetary easing, even as a key inflation report loomed later in the day.
The dollar index stayed close to an almost two-month high hit overnight, as traders further pared bets for U.S. rate cuts this year after last week’s unexpectedly strong payrolls data.
The euro stayed near its lowest level since August 13 against the dollar.
The “U.S. exceptionalism trade” has reignited on the back of the recent spate of strong jobs data, according to Kyle Rodda, senior financial markets analyst at Capital.com.
Minutes from the Federal Reserve’s latest meeting, released overnight, confirmed the central bank’s focus on keeping the labour market healthy.
The U.S. dollar is regaining, mostly because of continued U.S. economic outperformance, Rodda said.
At the same time, an upside surprise in U.S. consumer price index could force the Federal Reserve to doubt its confidence about the path for inflation, he said.
San Francisco Fed President Mary Daly said late on Wednesday that she was less concerned now about resurgent inflation than about hurting the labour market.
Traders lay 85% odds on the Fed cutting rates by 25 bps at its next policy decision on November 7, and a 15% chance of no change, according to the CME Group’s FedWatch Tool.
A week earlier, the probability of a quarter-point cut sat at 65%, with 35% odds for a half-point cut.
The dollar index was little changed at 102.89 by 0500 GMT, only marginally below Wednesday’s high of 102.93, a level last seen on August 16.
The U.S. currency rose to 149.40 yen, and earlier hit 149.54 yen for the first time since August 2.
