US dollar advances on month-end demand; focus on economic data
U.S. dollar set for steep monthly drop
Traders await Nvidia earnings, U.S. and euro zone inflation data
Bitcoin falls sharply
Adds new comment, graphic, updates prices
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 28 (Reuters) -The U.S. dollar gained onWednesday due to month-end buying and technicalfactors after recent declines that pushed it to its weakest in more than a year, as traders awaited data that could dictate thepace of the Federal Reserve's imminent easing cycle.
Sharp bouts of volatility hit foreign exchange marketsthis month as worries around a potential U.S. recession and hawkish signals from the Bank of Japan hammered the dollar and sent other major currencies soaring.
Traders also awaited earnings from artificial intelligence (AI) chip giant Nvidia NVDA.O, which has sparked a frenzy on Wall Street and beyond in recent years. The dollar has also been sensitive to moves in equity markets this year.
"With a series of potentially treacherous event risks looming, including this evening's earnings release from Nvidia and next Friday's hugely important non-farm payrolls report, traders are cutting exposures and buying the greenback against high-beta currencies," said Karl Schamotta, chief market strategist, at Corpay in Toronto.
The dollar index =USD, which measures the U.S. unitagainst a basket of six major currencies, rose 0.5%to 101.11, on pace for its largest daily percentage gain since mid-June.
For the month of August, however, the greenback has fallen 2.8%, its worst monthly decline since November 2023. It reached a 13-month low of 100.51 in the previous session, weighed down by a recent sharp re-evaluation of expectations for Fed rate cuts.
"The dollar's rise today is warranted given the move lower this month. We have seen a sharp depreciation in the dollar, being down 5% in the second half of 2024," said Boris Kovacevic, global macro strategist at Convera in Vienna, Austria.
"Looking at the flows, I would attribute the dollar bid today to the usual month-end flows, especially given the fall in the dollar this month."
Investors also expectthe Fed tobegin cutting interest rates next month following Chair Jerome Powell's dovish tilt last week, with the debate now centeredon whether or not it will do asuper-sized 50-basis point cut, or the standard 25-bp easing.
Current pricing indicateda 37% chance ofthe larger cut, unchanged from late on Tuesday,according to LSEG calculations.Markets also priced in about 105 bpsof easing by the end of the year.
DATA AHEAD
A preliminary estimate for U.S. gross domestic product in the second quarter is due later this week, along with the core personal consumption expenditures (PCE) index, the Fed's preferred inflation measure. Both could likely drive the dollar lower if the numbers come out weaker than expected.
Butgiven that markets have been expecting rate cuts from September for weeks now, the downside momentum on the dollar could be waning, with support built around 100.18/30 in the dollar index =USD, said Matt Simpson, senior market analyst at City Index.
"More broadly, valuations look overdone across a range of asset classes. If investors get cold feet in the coming weeks, the dollar's global dominance...might come in handy once again," said Corpay's Schamotta.
Against the yen, the dollar rose 0.5% to 144.685 yen JPY=EBS, moving away from Monday's three-week low.
The euro EUR=EBS slid 0.6%to $1.1116, still within reach of the 13-month peak seen earlier this week.
Investors await the release of euro zone August inflation data later in the week, which could provide clues about the European Central Bank's monetary policy path.
Sterling GBP=D3 fell 0.6%to $1.3186, after hitting its highest since March 2022 on Tuesday as traders bet the Bank of England will go slower on monetary policy easing than the Fed.
The Australian dollar AUD=D3 rose to a nearly eight-month high against the U.S. currency after data showed domestic inflation slowed to a four-month low in July, althoughthe general progress on tempering price gains disappointed. The Aussie was last down 0.2% atUS$0.6780.
In cryptocurrencies, bitcoin BTC= sank 4.1% to$59,302BTC=, part of a broader retreat in digital currency prices, as the initial boost from Powell's strong signal on rate cuts faded.
Currency bid prices at 28 August 07:20 p.m. GMT | |||||||
Description | RIC | Last | U.S. Close Previous Session | Pct Change | YTD Pct | High Bid | Low Bid |
Dollar index | =USD | 101.08 | 100.6 | 0.49% | -0.29% | 101.17 | 100.59 |
Euro/Dollar | EUR=EBS | 1.1117 | 1.1184 | -0.61% | 0.71% | $1.1184 | $1.1105 |
Dollar/Yen | JPY=D3 | 144.69 | 144.01 | 0.47% | 2.58% | 145.035 | 143.785 |
Euro/Yen | EURJPY= | 1.1117 | 161 | -0.09% | 3.35% | 161.37 | 160.46 |
Dollar/Swiss | CHF=EBS | 0.8421 | 0.8416 | 0.08% | 0.08% | 0.8452 | 0.8412 |
Sterling/Dollar | GBP=D3 | 1.3185 | 1.3261 | -0.56% | 3.62% | $1.3261 | $1.1105 |
Dollar/Canadian | CAD=D3 | 1.3473 | 1.3444 | 0.23% | 1.65% | 1.3488 | 1.3441 |
Aussie/Dollar | AUD=D3 | 0.6779 | 0.6793 | -0.19% | -0.56% | $0.6813 | $0.6765 |
Euro/Swiss | EURCHF= | 0.9362 | 0.9412 | -0.53% | 0.82% | 0.9419 | 0.9353 |
Euro/Sterling | EURGBP= | 0.8428 | 0.8434 | -0.07% | -2.77% | 0.8439 | 0.8411 |
NZ Dollar/Dollar | NZD=D3 | 0.6242 | 0.6253 | -0.15% | -1.2% | $0.6254 | 0.6224 |
Dollar/Norway | NOK= | 10.5016 | 10.4588 | 0.41% | 3.62% | 10.5451 | 10.4511 |
Euro/Norway | EURNOK= | 11.6753 | 11.7041 | -0.25% | 4.02% | 11.7416 | 11.661 |
Dollar/Sweden | SEK= | 10.1985 | 10.1492 | 0.49% | 1.31% | 10.22 | 10.1448 |
Euro/Sweden | EURSEK= | 11.337 | 11.3517 | -0.13% | 1.91% | 11.3656 | 11.3196 |
World FX rates https://tmsnrt.rs/2RBWI5E
US Dollar Index https://reut.rs/4dGFcap
Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Brigid Riley in Tokyo and Sruthi Shankar in Bengaluru; Editing by Miral Fahmy, Mark Potter and Kevin Liffey
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