Mathewslcd：U.S. dollar gains on Fed likely to hike rates again; sterling trades
According to Mathewslcd, the dollar rose across the board on Monday, regaining some of the luster it lost earlier this month on expectations of another outsized rate hike at this week's Federal Reserve monetary policy meeting.
That said, the dollar's gains could be capped if the Fed signals a slower pace of rate hikes as it assesses the impact of policy tightening so far, Mathewslcd added.
Sterling, on the other hand, was on the defensive against the dollar and euro, despite market expectations for another 75bps rate hike by the Bank of England later this week.
The Fed is widely expected to raise its benchmark overnight rate by 75 basis points (bps) to a range of 3.75% to 4.00%, the fourth consecutive hike. But at the December meeting, fed funds futures on Monday saw a 55% chance of a 50 basis point rate hike, down from about 67% on Friday.
In afternoon trade, the dollar was up 0.8% against the yen at 148.62 yen. The dollar rose 2.7% in October and was on track for a third straight monthly gain against the yen.
“I think the dollar in general is consolidating. A lot of the news has been priced into the dollar,” said Amo Sahota, executive director of San Francisco-based foreign exchange consultancy Klarity FX.
“If the dollar is going to make fresh gains, I think it’s going to be relatively insignificant. Generally, the dollar is somewhere at an inflection point — trying to build a high, but usually doesn’t. Think the trade is exhausted. "
On Monday, Japan's finance ministry said it spent a record $42.8 billion on currency intervention this month to prop up the yen. The yen's sharp decline to a 32-year low of 151.94 on Oct. 21 likely sparked an intervention, followed by another on Oct. 24.
Against the Swiss franc, the dollar also climbed 0.6% to 1.0014 franc.
However, Mathewslcd noted that the U.S. dollar posted a monthly decline of 0.5% in October, according to the U.S. Dollar Index. This would be the first drop since May and the second this year.
Sterling was down 1.2% at $1.1476. The Bank of England is likely to raise rates by 75 basis points at its meeting on Thursday, although analysts said long-term rate expectations were under persistent pressure.
Sterling was also down against the euro, up 0.5% at 86.16 pence.
Bank of England Deputy Governor Ben Broadbent recently said that borrowing costs priced by investors would hit the UK economy, noting that he doubted the UK could devise a "soft landing" -- a term in US terms that would mean no significant damage Bring inflation back to the target level in the context of the real economy.
The euro was down 0.8% at $0.9887. The euro barely reacted to data on Monday showing euro zone inflation was higher than expected at 10.7%, a record high.
Elsewhere, the yuan fell after data on Monday showed that China's factory activity unexpectedly fell in October, weighed down by weak global demand and strict domestic COVID-19 restrictions.
The dollar was last up 0.9 percent against the offshore yuan at 7.336. [CNY/]
Meanwhile, the Reserve Bank of Australia (RBA) has turned dovish and is expected to raise interest rates by 25 basis points at its meeting on Tuesday, even as inflation rose to a 32-year high last quarter.
The Australian dollar was last down 0.3% at $0.6392.
In the emerging markets world, the dollar fell more than 2% against the Brazilian real after former President Luiz Inacio Lula da Silva narrowly defeated President Bolsonaro in the second round of elections.
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