Dollar Tentative as Investors Wait for Fed Minutes

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SINGAPORE: The US dollar was stable on Wednesday as investors tempered their risk appetite ahead of the release of Federal Reserve policy meeting minutes that could provide clues about the outlook for inflation and interest rates.

The Fed will release the minutes of its most recent meeting on Wednesday, with investors watching for signs of discussions about moderating the pace of rate hikes.

The dollar index, which measures the greenback against six major counterparts, was last up 0.056 percent at 107.130, after falling 0.65 percent overnight.

The overnight move reflected better risk sentiment as stocks and bonds rose on the back of better corporate earnings and expectations of slower rate hikes by the Fed, said Carol Kong, a currency strategist at the Commonwealth Bank of Australia.

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Fed Chair Jerome Powell said this month that while borrowing costs should continue to rise, the central bank could raise interest rates in smaller increments going forward.

New Zealand’s central bank raised interest rates by 75 basis points on Wednesday to a nearly 14-year high of 4.25 percent.

The central bank said cash rates needed to reach higher levels sooner than previously stated to curb inflation. It also raised the expected peak for the cash rate to 5.5 percent in September 2023.

The kiwi rose 0.57 percent to $0.618, while the Australian dollar rose 0.06 percent to $0.665.

Meanwhile, China has tightened restrictions in some cities due to a spike in COVID-19 cases. The city of Chengdu will conduct mass testing for residents for five consecutive days.

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“Imposing a new restriction in the short term will undoubtedly have a negative economic impact, but for now at least the market seems to be focused on China wanting to gradually move towards a strategy for living with COVID in the medium term.” said Rodrigo Catril, a currency strategist at National Australia Bank.

“That said, we think setbacks are very likely in this process, so we should expect spikes in market volatility along the way.”

The euro rose 0.03 percent to $1.0305, following an overnight gain of 0.6 percent, while the pound last traded at $1.1888, up 0.04 percent on the day itself.

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Cryptocurrencies remained volatile, with bitcoin swinging between losses and gains. It most recently fell 0.21 percent to $16,163.

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Currency bid prices at 0123 GMT

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

Previous change

Session

Euro/dollar $1.0303 $1.0303 +0.01 percent -9.36 percent +1.0321 +1.0301

Dollar/Yen 141.3200 141.2250 -0.05 percent +22.72 percent +141.3300 +140.9800

Euro/Yen 145.62 145.50 +0.08 percent +11.74 percent +145.6300 +145.4100

Dollar/Swiss 0.9516 0.9515 +0.01 percent +4.32 percent +0.9520 +0.9507

Sterling/dollar 1.1882 1.1886 +0.05 percent -12.07 percent +1.1908 +1.1892

Dollar/Canadian 1.3374 1.3373 -0.02 percent +5.75 percent +1.3375 +1.3357

Aussie/dollar 0.6643 0.6650 -0.10 percent -8.61 percent +0.6659 +0.6642

NZ 0.6171 0.6155 +0.28 per cent -9.83 per cent +0.6193 +0.6121

dollars/dollars

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