Rate Cut Speculation Fades, Dollar Gains More Fierceness
The US dollar is on track for its best weekly gain in more than a month as markets grow increasingly skeptical about the Fed's December interest rate cut. The delayed September US jobs report instead painted a mixed picture: faster-than-expected job growth, but the unemployment rate rose to 4.4%, a four-year high. This data doesn't signal a clear path to easing, so the chance of a Fed rate cut next month is now estimated at only around 27%.
In the forex market, the euro is trading near a two-week low around $1.15 and is headed for a weekly decline of around 0.8%. The pound is trading slightly around $1.30 but is still down around 0.7% for the week, with market participants awaiting the UK budget announcement, which could be a major test for sterling and government bonds. The Dollar Index is near a 5.5-month peak around 100.20 and is projected to post a weekly gain of around 0.9%.
Commodity currencies are holding steady. The Australian dollar and New Zealand dollar each strengthened slightly in Friday morning trading after being hit by risk-off sentiment and weakening sharply the previous day. However, the main focus of the foreign exchange market was the yen's continued decline.
The Japanese yen slumped to a 10-month low of 157 per dollar and is likely to weaken nearly 2% in a week, amid market concerns about Japan's deteriorating fiscal position due to Prime Minister Sanae Takaichi's massive stimulus package of around 21.3 trillion yen. Finance Minister Satsuki Katayama opened the door to intervention if currency movements were deemed too volatile and speculative, making intervention risk a key topic. Meanwhile, Japan's core inflation remains around 3%, above the central bank's 2% target, keeping expectations of a near-term interest rate hike alive and adding to the yen's dynamics.
Source: Newsmaker.id
