Euro hits lowest since late June vs dollar on tariff worries
The euro hits a 4-1/2 month low versus dollar
Dollar close to levels seen right after U.S. elections
Investors focus on data while wait for clarity about U.S. policies
Recasts, adds comments, background
By Stefano Rebaudo and Wayne Cole
Nov 11 (Reuters) -The euro hit a 4-1/2-month low against the U.S. dollar as investors worried about possible U.S. tariffs which would hurt the euro area's economy.
The greenback was within striking distance of the levels seen right after the U.S. presidential election against major currencies as markets focused on data and Federal Reserve speakers and waited for clarity about futureU.S. policy.
Analysts expect measures from President-elect Donald Trump to put upward pressure on inflation and bond yields while limiting the Fed's scopeto ease policy.
However, they see investors trading on economic data and clues about the rate outlook before seeing what Trump's policies would actually be in practice.
Market participants flagged that the sensitivity of the euro to the threat of higher U.S. import tariffs was evident late Friday, when media reported that Trump was lining up Robert Lighthizer, seen as a hawk on trade, to run his trade policy.
However, two sources familiar with the matter said Lighthizer has not been asked by Trump to return to the agency overseeing trade policy.
The single currency EUR=EBS was down 0.3% at $1.0685, after hitting $1.0679, its lowest level since late-June.
"The thesis for dollar bears now is that it will take a while for tariffs to come through and the Fed recalibration to less restrictive monetary policy," said Chris Turner, head of forex strategy at ING.
"We disagree and think this clean election result can boost US consumer and business sentiment at the same time as it weighs on business sentiment elsewhere in the world," he added.
The dollar index =USD was 0.3% firmer at 105.32. Last week, it jumped more than 1.5% to 105.44, its highest since early July, after U.S. presidential election results showed the Trump's victory.
The dollar did regain 0.8% on the yen to 153.82 JPY=, having been dragged off last week's top of 154.70 by the risk of Japanese intervention. On Nov. 6 it hit 154.68, its highest level since July.
A summary of opinions from the Bank of Japan's October policy meeting showed some members were unsure on when to raise rates. The decision will not be made any easier by political uncertainty as Japanese lawmakers should decide on Monday whether Prime Minister Shigeru Ishiba remains leader after his coalition lost its parliamentary majority late last month.
The rate outlook will be crucial for the greenback in the near future, while all major central banks are easing their monetary policy.
U.S. consumer prices are due on Thursday and a core reading above the 0.3% forecasted would further reduce the chance of a Fed easing in December.
JPMorgan said it revised its U.S. terminal rate forecasts to 3.5% from 3% and expected one 25 bps Fed cut every quarter, starting from December.
The U.S. bond market is closed for a public holiday, though stocks and futures are open.
Citi expects U.S. rates to stay close to current levels in the near term as the market is caught between expectations of significant policy changes in 2025 and the easing cycle which is driven by near-term data.
Politics remained a drag in Europeas German Chancellor Olaf Scholz said he would be willing to call a vote of confidence before Christmas, paving the way for snap elections.
Analysts argued that the risk of policy changes in Germany which could lead to a looser fiscal policy is rising next year.
Disappointment at the latest package had seen the Australian AUD=D3 and New Zealand dollars NZD=D3 slide on Friday as both countries are major exporters to China.
The U.S. dollar hit versus offshore yuan CNH= its highest since early August stoodat 7.2131, up 0.25%, havingjumped 0.70%on Friday after falling 0.75% the day before.
Highlighting the bleak background in China, data out over the weekend showed consumer prices rose at the slowest pace in four months in October, while producer price deflation deepened.
Bitcoin soared to a record high above $81,000 on Monday on expectations that cryptocurrencies will boom in a favourable regulatory environment following the election of Trump as U.S. president and pro-crypto candidates to Congress.
Reporting by Stefano Rebaudo and Wayne Cole; Editing by David Gregorio, Jamie Freed, Alison Williams and Toby Chopra
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.
