Dollar pauses after posting biggest weekly rise for
2017; Fed eyed
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[October 30, 2017]
By Saikat Chatterjee
LONDON (Reuters) - The dollar slipped on
Monday after its biggest weekly rise this year as investors took profits
before a central bank decision this week where markets are waiting to
see if strong economic data will spur a more hawkish stance.
Net short bets on the dollar fell to their smallest in nearly three
months, about $8 billion, roughly half of what they were a month ago,
according to calculations by Reuters and Commodity Futures Trading
Commission data released last week.
Investor sentiment towards the dollar has undergone a significant shift
in recent weeks thanks to strong data and expectations about the
appointment of a new hawkish-leaning Federal Reserve chair.
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"We think the dollar positioning has become a lot more balanced in the
market and we would need some surprising inflation prints to push the
dollar higher from these levels," said Manuel Oliveri, currency
strategist at Credit Agricole.
The dollar index, which tracks the currency against a basket of six
major rivals, dipped 0.2 percent to 94.70 but remained not far from
Friday's three-month high of 95.150.
Friday’s release of third quarter GDP data showed the economy expanded
by 3.0 percent, beating forecasts, and the first time since 2014 that
the U.S. economy has experienced growth of 3 percent or more for two
quarters in a row.
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U.S. Dollar and Euro notes are seen in this June 22, 2017
illustration photo. REUTERS/Thomas White/Illustration
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Meanwhile, the euro climbed 0.20 percent to $1.1632 following a drop in
Spain's borrowing costs as nerves settled after a weekend poll showed
Catalan secessionists may lose their majority in elections scheduled for
December.
The euro, one of the best performing currencies this year, has been hit
in recent weeks as a dovish European Central Bank combined with unrest
in Catalonia has prompted some investors to take profits.
Elsewhere, the dollar was broadly flat against the yen to 113.58, after
a three-month high of 114.45 yen on Friday.
At its two-day meeting ending on Tuesday, the Bank of Japan is set to
keep intact a pledge to guide short-term interest rates at minus 0.1
percent and the 10-year Japanese government bond yield around zero
percent.
Prime Minister Shinzo Abe's victory in a lower house election this month
heightened expectations the BOJ's ultra-loose policy - a key pillar of
his "Abenomics" stimulus policies - will continue, as inflation remains
well short of the central bank's target. Japan's core consumer prices
rose 0.7 percent year-on-year in September.
(Reporting by Saikat Chatterjee; Editing by Robin Pomeroy)
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