Dollar firm following sharp rebound as Fed speakers are monitored – Reuters

By Kevin Buckland

TOKYO (Reuters) – The dollar remained strong on Thursday following its most significant rally since early June, as traders anticipated speeches from key Federal Reserve officials later in the day to provide insights on the pace of interest rate cuts.

The U.S. currency made a robust recovery overnight, bouncing back from a more than one-year low against the euro and a 2.5-year low against the British pound.

Though there was no specific trigger for this rebound, investors seemed to adopt a more nuanced perspective regarding the aggressiveness of future U.S. rate cuts. Fed speakers throughout the week have not shared a cohesive viewpoint on the direction forward.

On Wednesday, Fed Governor Adriana Kugler expressed strong support for the half-point rate cut announced earlier this month to initiate the easing cycle, but did not discuss her preferences concerning future rate cuts.

Earlier in the week, Chicago Fed President Austan Goolsbee indicated that policymakers must avoid “being behind the curve” if the economy is to achieve a soft landing. In contrast, Atlanta Fed President Raphael Bostic suggested that the central bank does not need to hastily lower rates.

“I’m not sensing a particularly unanimous sentiment at this moment,” stated Kenneth Crompton, chief rates strategist at National Australia Bank. “It seems they’ve caught up, and from here, rate cuts might lean more toward 25 basis points rather than 50.”

Later Thursday, Fed Chair Jerome Powell will deliver pre-recorded remarks at a conference in New York, alongside New York Fed President John Williams. Boston Fed President Susan Collins and Fed Governors Michelle Bowman and Lisa Cook will also speak at various other events.

The weekly U.S. jobless claims data will be closely monitored later on Thursday, especially given the Fed’s recent focus on employment rather than inflation.

“Given that considerable labor market weakening is likely needed to support market pricing for at least one more 50 basis point cut this year, the jobless claims report serves as the best high-frequency indicator we have on that,” explained NAB’s Crompton.

Traders are still anticipating a second substantial 50-basis point rate cut at the Fed’s upcoming meeting in November, although the probability decreased slightly to 57.4% from 58.2% a day earlier.

The dollar index, which tracks the currency against the euro, pound, yen, and three other major peers, dipped 0.07% to 100.87 by 0034 GMT, following a significant 0.57% increase on Wednesday—its largest single-day gain since June 7.

The euro remained relatively stable at $1.1135 after a sharp correction from $1.1214, a level not seen since July of the previous year.

Sterling was flat at $1.3322, maintaining levels after reaching $1.3430 on Wednesday, a peak not seen since February 2022.

The yen appreciated about 0.15% to 144.57 per dollar, recovering from a three-week low of 144.845 hit during the previous session.

Minutes from the Bank of Japan’s July meeting, during which rates were raised, indicated a division among policymakers regarding the speed at which further rate hikes should occur.

The Australian dollar gained 0.15% to $0.68335, stabilizing after a notable drop from a 19-month high of $0.6908 recorded on Wednesday.

The Chinese yuan held steady at 7.0284 per dollar in offshore trading after retreating from its peak since May of last year at 6.9952.

The Swiss franc showed minimal change at 0.8499 per dollar ahead of a policy announcement from the central bank on Thursday, where another quarter-point rate cut is widely anticipated.

In cryptocurrency news, bitcoin decreased by 0.8%, trading at $62,915.

(Note: This story has been amended to clarify that it refers to U.S. rate reductions, not hikes, in paragraph 3.)