(Updates prices, market activity and comments)
NEW YORK, Dec 21 (Reuters) – The dollar hit a one-week
low against a basket of major currencies on Thursday as U.S.
equities rebounded from the prior day’s sell-off and investors
braced for Friday’s U.S. inflation data for clues to the path of
future Federal Reserve policy.
Data earlier Thursday
showed gross domestic product increased at a 4.9%
annualized rate last quarter, revised down from the previously
reported 5.2%. The consumer spending element of third-quarter
GDP was revised downward to 3.1% from 3.6% in the previous
estimate.
“The GDP number wasn’t very helpful,” said Marc Chandler,
chief market strategist at Bannockburn Global Forex in New York.
“We had a little bit less growth than we thought.”
“But there is nothing (in the day’s action) that says
the market is having second thoughts about how aggressive it’s
anticipating rate cuts in the year ahead,” he said. “The dollar
has been generally soft … so I think we’re just churning for
the most part.”
The U.S. currency rose on Wednesday in a safe-haven bid
after U.S. stocks’ abrupt afternoon sell-off.
The Fed held interest rates steady last week and
policymakers signaled in new economic projections that the
historic monetary policy tightening engineered over the last two
years is at an end and lower borrowing costs are coming in 2024.
A separate report on Thursday showed the number of Americans
filing new claims for unemployment benefits rose just marginally
last week, suggesting underlying strength in the economy as the
year winds down.
Investor now await Friday’s reading on U.S. core personal
consumption expenditure (PCE) index. A November rise of 0.1%
would slow the six-month annualized pace of inflation to just
2.1%, almost at the Fed’s 2% target.
Some investors expect slower inflation will prompt the Fed
to ease policy to stop real rates from rising, and are wagering
on early and aggressive action.
The dollar fell 0.93% against the Japanese yen. Japan’s
government on Thursday slightly raised its economic growth
projections for this fiscal year from its previous estimates.
The yen is down roughly 8% against the dollar for the year
as the Bank of Japan has steadfastly kept short-term rates
negative, against 300 basis points of U.S. interest rate hikes.
Sterling was up 0.4% at $1.2689 against the dollar
on Thursday, a day after suffering its sharpest drop in two
months on news that British inflation dived below forecasts to
an annual 3.9% in October, a two-year low. Traders priced in
Bank of England rate cuts as soon as May.
The dollar index, which tracks the U.S. currency
against six peers, was last down 0.596% at 101.8. It hit its
lowest level in a week.
Some analysts said month-end rebalancing in thin trade could
weigh on the dollar in the near term.
“U.S. equity market outperformance through December
rather suggests that passive hedge rebalancing flows will run
against the USD through month end,” said Shaun Osborne, chief FX
strategist at Scotiabank.
The risk-sensitive Australian and New Zealand dollars
traded higher on the day. The Aussie was last up
1.04
% at $
0.68005
, after touching $
0.68035
. The kiwi traded up
0.74
% at $
0.6294
.
Bitcoin was
0.29
% higher at $
43,791
.
(Reporting by Saqib Iqbal Ahmed and Caroline Valetkevitch;
Additional reporting by Samuel Indyk and Tom Westbrook; Editing
by Chizu Nomiyama, Bernadette Baum and Richard Chang)
