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The stronger greenback caused the pound briefly to dip below
$1.2 in early European trading, its lowest in three weeks, the
euro to drop to as low as $1.0146 and the Japanese yen to drift
down to 135.45 per dollar.
This pushed the dollar index as high as 106.96, its highest
since late July.
In the course of morning trading, however, the euro, sterling
and yen all pared their losses, recovering to trade flat on the
day, leaving the dollar index at 106.65.
Thomas Poullaouec, head of multi-asset solutions APAC at T. Rowe
Price, said he expected the dollar would "keep on smiling".
"The 'dollar smile' theory holds that the currency does well at
each end of the global growth continuum, benefiting when
relative U.S. growth and rates are higher as well as from being
a 'safe haven' when global growth is declining - both of which
are happening," he said in emailed comments.
"At this point, it appears the only thing that could slow the
dollar is a pivot by the Fed, which would likely only come amid
signs of much weaker growth in the U.S. or stronger evidence of
receding inflation. For now it looks like the dollar will keep
on smiling."
Fed officials saw "little evidence" late last month that U.S.
inflationary pressures were easing, minutes released on
Wednesday showed.
They flagged an eventual slowdown in the pace of hikes, but not
a switch to cuts in 2023 that traders until recently had priced
in to interest-rate futures.
Traders see about a 40% chance of a third consecutive 75 basis
point Fed rate hike in September, and expect rates to hit a peak
around 3.7% by March, and to hover around there until later in
2023.
In Asian trade, the greenback gained most against the
Antipodeans, especially the Aussie, which was dragged down as
weaker-than-expected wage growth weighed on Australia's rates
outlook.
The Australian dollar fell to a one-week low of $0.6899,
following labour data that showed falls in both employment and
the jobless rate, before bouncing back to $0.6951, up a
fraction.
China's yuan, meanwhile, continued to struggle as weak
consumption, low confidence, anaemic credit growth, a property
crisis and restrictive COVID-19 policies have cast a long shadow
over prospects for the world's second-largest economy.
The yuan fell nearly 0.2% to 6.788 per dollar, and also dropped
below its 200-day moving average against the euro.. [CNY/]
Currency bid prices at 1137 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low
Bid
Previous Change
Session
Euro/Dollar
$1.0188 $1.0178 +0.09% -10.39% +1.0193 +1.0146
Dollar/Yen
134.9050 134.9950 -0.02% +17.35% +135.4200 +134.8000
Euro/Yen
137.43 137.47 -0.03% +5.46% +137.6500 +137.1600
Dollar/Swiss
0.9516 0.9519 +0.03% +4.38% +0.9544 +0.9501
Sterling/Dollar
1.2068 1.2050 +0.14% -10.77% +1.2079 +1.1995
Dollar/Canadian
1.2888 1.2915 -0.19% +1.96% +1.2946 +1.2882
Aussie/Dollar
0.6960 0.6937 +0.33% -4.25% +0.6970 +0.6899
NZ
Dollar/Dollar 0.6299 0.6281 +0.25% -8.00% +0.6299 +0.6248
All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook and Alun John; Editing by Kim
Coghill and Mark Potter)
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