SING`ORE, Sept 7 (Reuters) – A buoyant dollar pushed the yen to a 10-month low on Thursday and kept the euro and sterling near three-month lows as investors still predicted robust amid the crisis US Economy Confidence Gloomy Global Growth Prospects.
The dollar hit a new high of 147.865 yen in early Asian trade, its highest since last November.
The dollar was last up 0.05% against a basket of currencies at 104.91, holding on to some of its gains from the pre-session after hitting a six-month high on news that the US services sector unexpectedly gained momentum in August had.
Stronger-than-expected data pushed the euro to its lowest level since June of $1.0703 on Wednesday, with the single currency last seen 0.03% lower at $1.0723.
Sterling was also down 0.07% to trade at $1.24985, having also bottomed at a three-month low of $1.24835 in the previous session.
“It was definitely a good (ISM)…so those thinking of a (US) recession in the near future might be a bit disappointed,” said Joseph Capurso, head of international and sustainable economics at the Commonwealth Bank of Australia (CBA). ). “However, the Beige Book was… actually not that great.”
US economic growth has been “modest” in recent weeks, job growth has been “subdued” and inflation has slowed in most parts of the country, according to the Federal Reserve report released on Wednesday.
“I think what’s really driving the dollar isn’t so much that the US economy is doing well as that it’s doing better than anywhere else.”
According to the CME FedWatch tool, the probability of the Fed conducting another rate hike in November is close to 47% based on market prices, although policymakers are expected to leave rates on hold later this month.
Conversely, Bank of England (BoE) Governor Andrew Bailey said on Wednesday that the central bank was “much closer” to the end of its rate-hike cycle, although persistent inflationary pressures may require borrowing costs to rise even further.
On the same day, European Central Bank policymakers warned investors that the decision to raise interest rates next week was still pending, but that raising borrowing costs was among the options on the table.
“It was surprising to see these dovish comments from Governor Bailey…it certainly gives us confidence that they will only hike rates twice more,” Capurso said, referring to the BoE.
“As for the ECB, we find that there is real divergence between the various ECB members, and that to me suggests the ECB is going to deliver at most one more rate hike.”
In Japan, traders remained wary of intervention as the fragile yen struggled to assert itself against the dollar, although officials stepped up warnings of a sell-off in the yen.
The Japanese currency last bought at 147.76 per dollar after falling above the closely watched 145 level for almost a month. This was the key reading that prompted the authorities to intervene to support the yen last year.
“The yen’s verbal intervention raises the question of whether real intervention is likely,” said Saxo market strategist Charu Chanana. “As we have seen in the past, real intervention is unlikely to sustainably reverse the yen’s course.”
The Australian dollar fell 0.05% to $0.63795, while the New Zealand dollar fell 0.01% to $0.5869, both trading near their recent 10-month lows.
China’s trade numbers are expected later on Thursday, which could put further pressure on antipodean currencies if the data points to further weakness in the world’s second largest economy.
The two are commonly used as liquid proxies for the Chinese yuan.
The offshore yuan was last slightly lower at 7.3241 per dollar.
Reporting by Rae Wee; Edited by Jacqueline Wong
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