Dollar recovers after three-day slide as investors await cues on Trump policies
Bitcoin close to overnight record high of $94,078.22
Sterling spikes briefly after strong inflation report
Dollar/yen firms 0.7%, reversing previous day's move
Updates at 0905 GMT
By Medha Singh and Kevin Buckland
Nov 20 (Reuters) -The U.S. dollar climbed from a one-week low on Wednesday, while the Japanese yen slid as safety haven demand faded and investors awaited more cues on U.S. President-elect Donald Trump's proposed policies.
The previous day's boost to the dollar and other traditional safe-haven currencies like the yen proved short-lived, after Russia's foreign minister said the country would "do everything possible" to avoid the onset of nuclear war, hours after Moscow announced it would lower its threshold for a nuclear strike.
The Russia-Ukraine "fears have died back but the market will be sensitive to any renewed news or any fresh news on that front", said Jane Foley, head of FX strategy, at Rabobank in London.
The Japanese yen JPY= dropped to 155.67 against the greenback, retracing the previous day's gains. The yen's slide to a three-month low upped bets of a likely hawkish shift at the Bank of Japan as it nears levels that drew intervention in July.
Foley said 155 was the dollar-yen level that made markets nervous of intervention, adding that "if there is the possibility that verbal intervention is having a significant impact in stabilizing the currency pair, then that is likely to deter the ministry of finance, at least for a while, from using actual intervention".
BOJ Governor Kazuo Ueda made only passing mention of the currency on Monday.
The dollar index =USD - which measures the currency against six major peers - gained 0.3% to 106.42, recovering from a three-day slide.
The index hit a one-year high of 107.07 on Thursday last week, buoyed by expectations for big fiscal spending, higher tariffs and tighter immigration under the incoming U.S. administration, measures which economists say could foster inflation and potentially slow Federal Reserve easing.
"Having priced in a lot of the Trump trade, we might be in consolidation phase until early January when Trump does takes the reins and we get a firmer idea of the detail of the policy," Foley said.
'TRUMP TRADE'
Investors are still waiting for Trump to name a Treasury Secretary, one of the highest-profile cabinet posts overseeing the country's financial and economic policy. Some of Trump's picks have provoked controversy for their relatively meagre relevant experience.
"The 'Trump Trade' that boosted the greenback is facing challenges from Trump's controversial cabinet nominations and the escalation in the Russian-Ukraine war," DBS strategists wrote in a client note.
For the dollar over longer term though, "more weight should be put on firm economic data and the increasing likelihood that the Fed may have to slow the rate cut path even more in 2025", they said.
Traders continue to pare back expectations for an interest-rate cut at the Fed's next meeting in December. Odds now stand at 59.1%, down from 82.5% a week ago, according to CME's FedWatch Tool.
Sterling GBP=D3 got a brief boost after data showed British consumer inflation accelerated more quickly than forecast in October, supporting the view that the Bank of England will lower interest rates only gradually in the coming months. The pound was last flat at $1.26775.
BoE Governor Andrew Bailey told parliament on Tuesday that the central bank needed to take a "gradual approach" to easing.
Traders currently see an 84% chance that the BoE will hold rates steady at its policy meeting next month.
The euro dipped 0.3% to $1.056 EUR=EBS, having recovered from a drop to $1.0524 in the previous session.
Bitcoin crept up towards the all-time peak above $94,000 hit overnight, carried by expectations for a friendlier regulatory environment for cryptocurrencies under Trump.
A report said Trump's social media company was in talks to buy crypto trading firm Bakkt BKKT.N, bolstering hopes of a cryptocurrency-friendly regime under his administration.
World FX rates https://tmsnrt.rs/2RBWI5E
Reporting by Kevin Buckland; Editing by Shri Navaratnam and Alex Richardson
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
