Currency traders are gearing up for one of the busiest weeks of the year.
The European Central Bank (ECB) is forecast to boost monetary stimulus, the US Federal Reserve gets its last chance to scrutinize US payroll data before its Dec. 15-16 meeting, and Fed Chair Janet Yellen appears before Congress.
Those events may prove crucial for determining the path of the dollar, which is poised for its best month since July.
Investors are increasingly questioning how much further the US currency can strengthen after appreciating almost 10 percent this year. The Bloomberg Dollar Spot Index is trading near its highest in data going back to December 2004, while Societe Generale SA’s Kit Juckes wrote in a client note on Friday that the currency is overvalued by some measures. At the same time, futures show traders continue to pile on dollar wagers amid speculation that the Fed will raise rates next month.
“It’s all going to come down to next week,” Bipan Rai, director of foreign-exchange strategy at Canadian Imperial Bank of Commerce’s CIBC World Markets unit, said from Toronto. “There’s really a mishmash of event risks to watch for.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 peers, added 0.5 percent this week. The measure is set to rise 2.3 percent this month.
The US currency rose for a second week versus the euro, adding 0.5 percent to US$1.0593 per euro. The dollar was little changed at ￥122.85.
European policymakers meet on Thursday to discuss monetary policy and what the ECB can do to prop up sluggish inflation within the region. The central bank is considering cutting its deposit rate further below zero and adding to its program of quantitative easing.
That contrasts with the US, where officials are edging closer to a rate increase as early as next month. Yellen is scheduled to address the Economic Club of Washington on Wednesday and appear before a congressional committee on Thursday, a day before this month’s jobs data are released.
US companies probably added 200,000 jobs this month, according to a survey of analysts compiled by Bloomberg.
That would be down from 271,000 positions added last month, the most this year.
“Our expectation is that next week the payrolls report should continue to show that employment growth is still expanding solidly in the US,” London-based Bank of Tokyo-Mitsubishi UFJ Ltd currency strategist Lee Hardman said. “The divergence trade has regained momentum and that’s encouraging the rebuilding of long dollar positioning.”
The British pound fell for a second day after a report confirmed UK economic growth slowed in the third quarter.
The pound dropped 0.4 percent to US$1.5041 at 4:45pm London time, after sliding 0.2 percent on Thursday.
It fell 1 percent this week, the most since Nov. 6. Sterling slipped 0.2 percent to ￡0.7041 per euro, compounding a 0.5 percent weekly decline.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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