Fed opinion pushes dollar to 2 1/2 month high; yen under pressure By Reuters
Written by Brigid Riley
TOKYO (Reuters) – The U.S. dollar rose to a 2-1/2-month high on Wednesday as investors adjusted bets on a gradual decline in interest rates while keeping a close eye on the presidential election race.
The yen remained under pressure as the dollar and US Treasury yields edged higher, pushing it to a three-month low.
The greenback hit a three-week high as expectations of aggressive rate cuts from the Federal Reserve faded after a slew of upbeat economic data.
Markets now have a 91% chance of a quarter-basis-point rate cut in November, the CME FedWatch tool showed. A month earlier, investors were divided between bets by 50 points.
That little Fed look helped buoy Treasury yields. The yield on the 10-year benchmark reached its highest since July 26 at 4.222% on Tuesday.
Among Wednesday's light calendar of economic data, a prominent event is the release of the Fed's Beige Book summary of economic conditions.
The latest Beige Book showed a slowdown in economic growth by one percent, a pattern likely to be repeated in the October report, said Matt Simpson, chief market analyst at City Index. However, the upside appears to be more likely given the latest data to exceed forecasts, he said.
“However, the USD and US index are producing bearish gains on Tuesday, suggesting that bulls should tread carefully, especially if we see a two-year return below 4%.
The , which measures the US currency against six others, ended up 0.11% at 104.18 after touching as high as 104.19, the highest since Aug. 2. The index is up more than 3% so far this month.
With weeks to go before votes are tallied in the presidential election, investors have been weighing the risks of a Republican sweep – widely expected to be the greenback's best election scenario.
In a new Reuters/Ipsos poll, Democratic Vice President Kamala Harris has a 46% to 43% lead over Republican President Donald Trump.
Markets, however, appear to have priced in a Trump win but there is “still plenty of time” to reprice, said City Index's Simpson.
“We may see a slight pullback to the strong dollar and yields if markets price in a Harris win, if his policies are seen as high inflation.”
A rise in US Treasury yields kept the heat on the yen to a three-month low of 151.72 against the greenback.
Japan will hold a general election on Oct. 27. Recent opinion polls have shown that the ruling Liberal Democratic Party may lose its majority to coalition partner Komeito.
The coalition government's risks have raised the possibility of political instability complicating the Bank of Japan's effort to reduce reliance on monetary stimulus.
Elsewhere, the euro ended at $1.0794 after falling to its lowest since Aug. 2 at $1.0792. European Central Bank policymakers joined on Tuesday to raise the risk of inflation falling below the bank's 2% target.
Sterling was at $1.2976 after falling to its lowest since Aug. 19 of $1.2945 in the previous session.
In cryptocurrencies, bitcoin shed 0.33% to $67,254.00.
(This story has been corrected to say 'downgrading', not 'upgrading', in paragraph 3)
