The dollar index rose 0.11% to 102.6, not far from Friday’s seven-week high of 102.69
The dollar drifted sideways on Wednesday, giving some relief to the yen and other major currencies after a sharp rally to a seven-week high last week, as investors paused to assess the interest rate outlook for the US.
The New Zealand dollar plunged to its lowest since August 19 at $0.60705, after the Reserve Bank of New Zealand (RBNZ) cut interest rates by 50 bps and left the door open to yet more aggressive monetary easing.
The sparse U.S. data calendar this week provides a pause after the strong jobs report last Friday sent the dollar rallying and had markets tempering the expected scale of upcoming interest rate cuts.
On Wednesday, investors will get minutes of the Fed’s September meeting, which will show discussions about what at the time had seemed to be a deteriorating labour market that ended with all but one policymaker agreeing to a 50 bp cut.
But the robust NFP data has seen markets reprice near-term Fed rate cut expectations. Investors now have about an 85% probability of a quarter basis point cut priced in, as well as a slim probability the Federal Reserve will leave rates unchanged, according to the CME FedWatch tool.
The U.S. September CPI report on Thursday will the main piece of data this week.
U.S. inflation data this week and upcoming corporate earnings will be key to sustaining the U.S. dollar rebound and will need to reinforce the US exceptionalism narrative, analysts at Westpac IQ wrote in a note.
The dollar index rose 0.11% to 102.6, not far from Friday’s seven-week high of 102.69.
The euro was 0.14% lower at $1.0965, while the pound slipped 0.15% to $1.3083, close to the more than three-week low of $1.30595 it hit on Monday.
Dollar/yen traded in a narrow range, last hovering around 148.35 yen, after hitting a seven-week high of 149.10 on Monday.
Markets will not be keen to pile into JPY shorts ahead of election uncertainty for both the U.S. and Japan, according to Wei Liang Chang, a currency strategist at DBS.
Elsewhere, the kiwi was 0.77% lower at $0.60885 as investors assessed the RBNZ’s policy decision and its clear dovish signal indicating many more rate cuts were on the cards in coming months.
The Australian dollar was down, having slipped on Tuesday to $0.6715, its lowest since September 16, after minutes from the latest meeting of the country’s central bank came off as dovish. It last traded not far off that low, down 0.31% at $0.6726.
