Dollar steady against euro; yen weakens as Fed policy stays in focus

NEW YORK – The dollar held steady against the euro on Friday after Federal Reserve Chair Jerome Powell indicated that the central bank could hike rates again if inflation remains above its target.

Meanwhile, the Japanese yen weakened as traders remained on watch for possible intervention to shore up the struggling currency.

Powell and other Fed officials said on Thursday that they are still not sure that interest rates are high enough to finish the battle with inflation, with Powell saying that the Fed may get further help in taming price increases from improvements in the supply of goods, services and labor.

Markets are looking for “the ray of sunshine” that the Fed is done hiking rates, even though Powell since Jackson Hole has been clear that it will depend on data as it comes in, said Lou Brien, market strategist at DRW Trading in Chicago.

“Yesterday was another one of those occasions where Powell reminded that we have to take care of inflation, we don’t know that we’ve done enough yet – we will know as the data unfolds but we might have to do more if the data doesn’t unfold as we anticipate,” he said.

The dollar briefly gained on Friday after data showed that consumer sentiment fell in November, while inflation expectations rose.

The dollar index was last little changed on the day at 105.92. Consumer price inflation and retail sales data due next week are the next major U.S. economic releases.

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The dollar tumbled last week after Powell was interpreted as striking a dovish tone after the Fed’s two-day meeting, with softer-then-expected jobs data on Friday adding to a belief that the Fed has finished hiking interest rates.

Fed funds futures traders are pricing in an 18% chance of an additional hike by January, down from 28% a week ago, according to the CME Group’s FedWatch Tool.

The dollar also spiked on Thursday in line with Treasury yields after the U.S. Treasury Department saw weak demand for a $24 billion 30-year bond auction.

It was not clear whether demand for the debt was impacted by a ransomware attack on the Industrial and Commercial Bank of China’s (ICBC) U.S. arm, which has disrupted some trades in the U.S. Treasury market.

The euro edged up 0.04% to $1.0671.

European Central Bank interest rates kept at a record high for long enough could return inflation to the bank’s 2% target, ECB President Christine Lagarde said on Friday.

Against the Japanese yen, the dollar gained 0.09% to 151.47 yen, the highest since Nov. 1. Traders remained on alert for potential intervention in the Japanese currency, which is near a one-year low of 151.74 reached last week. The euro also hit a 15-year high of 161.85 against the Japanese currency on Friday.

The Norwegian crown jumped after data showed Norway’s inflation was stronger than expected in October, boosting market rate hike expectations.

The dollar was last down 0.82% at 11.15 crowns to the dollar.

The Australian dollar fell to $0.6341, the lowest since Nov. 1. It has tumbled since the Reserve Bank of Australia on Tuesday raised interest rates to a 12-year high but played down the probability of further increases.

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Bitcoin, the world’s largest cryptocurrency, was at $37,098, having peaked at $37,978 in the previous session, its highest level since May 2022.

Prices of the digital assets have surged after speculation of an imminent approval of BlackRock’s spot bitcoin ETF.

A spot crypto ETF would make the sector “more accessible for institutional investors to enter the crypto space, likely boosting demand and subsequently prices,” said Carl Szantyr, managing partner of digital asset hedge fund Blockstone Capital.

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Currency bid prices at 10:10AM (1510 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 105.9200 105.9200 +0.01% 2.348% +106.0100 +105.7400

Euro/Dollar $1.0671 $1.0668 +0.04% -0.41% +$1.0693 +$1.0657

Dollar/Yen 151.4700 151.3500 +0.09% +15.54% +151.5450 +151.2300

Euro/Yen 161.62 161.44 +0.11% +15.20% +161.8500 +161.3600

Dollar/Swiss 0.9028 0.9031 -0.04% -2.37% +0.9046 +0.9003

Sterling/Dollar $1.2199 $1.2221 -0.17% +0.88% +$1.2237 +$1.2188

Dollar/Canadian 1.3837 1.3806 +0.20% +2.10% +1.3844 +1.3792