© Reuters. FILE PHOTO: Banknotes of the Japanese yen and US dollar are seen in this illustration photo taken September 23, 2022. REUTERS/Florence Lo/Illustration
By Harry Robertson and Rae Wee
LONDON/SINGAPORE (Reuters) – The dollar wavered on Friday and was little changed in London morning trade after two days of gains, as investors weighed the interest rate outlook after strong US economic data. than expected to be announced on Thursday.
The euro edged up slightly against the dollar, 0.1% higher at $1.061, after falling less than 0.1% on Thursday.
Meanwhile, the yen fell 0.2% to 132.62 against the dollar. However, the Japanese currency is on track for a weekly gain of around 3% after the Bank of Japan (BOJ) adjusted its key bond market policy earlier this week.
In a brutal year for global markets, the dollar rallied nearly 9% as the US Federal Reserve sharply raised interest rates to tame inflation, luring investors back into assets. fixed income of the country.
However, the currency has fallen more than 8% since hitting a 20-year high in September, with a sharp drop in inflation in the US stoking hopes that the Fed could end the tightening cycle soon.
However, the data cast doubt on the Fed’s idea of a pause on Thursday. The number of Americans filing new claims for unemployment benefits rose less than expected last week, suggesting a still-tight labor market.
A second report said the US economy recovered in the third quarter at a faster rate than previously estimated.
The dollar index, which tracks the currency against major currencies, was down less than 0.1% on Friday at 104.31.
“The market continues to swirl around thinking about what the Fed will do next,” said Jarrod Kerr, chief economist at Kiwibank.
Kerr said investors are trying to “find out when and to what extent the last rate hike was.”
The British pound rose 0.29% to $1.207. The coin is up 0.51% to $0.628, while the coin is 0.41% higher at $0.67.
With the yen in the spotlight, data showed Japan’s core consumer inflation hit a 40-year high of 3.7% in November as companies continued to shift spending. increased costs to households.
The Japanese currency rallied nearly 4% on Tuesday – its biggest daily gain since 1998 – after the BOJ made a key policy change that made Japanese assets look more attractive.
The central bank will now allow the 10-year yield to move 50 basis points either side of its 0% target, wider than the previous 25 basis point range.
Erik Nelson, macro strategist at Wells Fargo (NYSE:). “But I don’t have the feeling that there’s going to be a big round of funding to pursue this by the end of the year.”
Nelson said that low trading volume during the holiday season has made the currency more volatile than usual. “I don’t take any of the moves we’ve seen in the market seriously,” he said.