Dollar sinks to 2024 low, gold tops on renewed bets on jumbo Fed cuts By Reuters
Written by Kevin Buckland
TOKYO (Reuters) – The dollar fell to its worst this year on Friday against the yen and gold hit a record high as investors hedged bets for a Federal Reserve interest rate cut next week.
Asian shares also advanced after traders raised bets back to 45% for a US rate cut of 50 basis points on September 18, according to LSEG data at 0510 GMT, up from about 28% ahead of the Financial headlines Times and Wall Street Journal respectively. he called the decision a “close call”.
Former New York Fed President Bill Dudley later said at a Singapore forum that “there is a strong case for 50.”
“This is yet another twist in the (Fed rate cut) discussion,” said Tony Sycamore, an analyst at IG, noting the tug of war over bond futures and the dollar-yen rate in particular.
“Everyone thought we were back on track for 25 points, and now 50 is suddenly back on the table.”
The dollar fell 0.81% to 140.645 yen, its weakest level since Dec. 28.
The yen was also supported this week by dovish comments from Bank of Japan officials, with policy board member Naoki Tamura on Thursday saying he was “worried that the risk of inflation is increasing.”
The , which measures the currency against the yen and five other major rivals, fell to a one-week low of 101.00.
Commonwealth Bank of Australia (OTC:) strategist Carol Kong says the Federal Open Market Committee's (FOMC) current easing rates are too high.
“We continue to favor a 25 bp cut over 50 bp, because the labor market and the broader economy remain strong,” he wrote in the paper.
“Current market prices are aggressive compared to the average FOMC rate cut cycle without a recession. We, along with the consensus of US economists, do not expect the US economy to enter a recession.”
The euro added 0.07% to $1.1083, building on Thursday's 0.57% gain after European Central Bank President Christine Lagarde backed off hopes for an October rate cut, following a widely expected quarterly cut on Thursday.
Gold extended Thursday's climb by 1.9% to hit a new record high of $2,570.03, buoyed by a weaker dollar.
MSCI's broad index of Asia-Pacific shares outside Japan rose 0.48%.
Hong Kong's development led regional markets, gaining 0.94%. Mainland China chips added 0.09%, despite expectations that weak economic data will be released on Saturday.
Australia's benchmark rose 0.25%. South Korea's Kospi fell 0.1%.
Underperforming Japanese stocks, however, were dragged down by a stronger yen, losing 0.35%.
Japan, mainland China and South Korea will all enter long weekends, with Tokyo returning on Tuesday, China on Wednesday and South Korea until Thursday.
US stock futures added 0.1%, following Thursday's gains in currency indexes.
Pan-European STOXX 50 futures advanced 0.42%.
continued to climb after rising nearly 2% overnight, as producers assessed the impact on output after Hurricane Francine tore through the Gulf of Mexico.
US West Texas Intermediate crude futures rose 0.71% to $69.46 a barrel, building on Thursday's session up 2.5%. futures added 0.65% to $72.44, after jumping 1.9% in the previous session.
