The Dollar Remains Stable as Traders await job data
The dollar remained stable on the day, although down from three-month highs set earlier on Wednesday, as Federal Reserve Chairman Jerome Powell delivered no significant shocks during his second day of congressional testimony and as investors awaited Friday's employment report.
Powell reinforced his message of greater and perhaps quicker interest rate rises but stressed that the discussion was still ongoing, with a decision based on data due out before the US central bank's policy meeting in two weeks. "Powell hasn't changed much of the dollar's higher trajectory," said Joe Manimbo, senior market analyst at Convera in Washington.
"The market is now just preparing for Friday's payrolls and next week's inflation to see if the Fed is on pace for the larger 50 basis point rate rise later this month." The dollar rose on Tuesday after Powell stated that the Fed will likely need to raise interest rates more than expected in response to strong data and that it is prepared to take larger steps if the "totality" of incoming information indicated that tougher measures were required to control inflation.
As a result, traders revised their rate estimates. Fed funds futures traders now expect a 70% chance of a 50 basis point raises at the Fed's March 21-22 meeting, up from roughly 22% prior to Powell's speech on Tuesday.
The rate is now predicted to peak in September at 5.69%. Investors are waiting for February job data, which is coming on Friday, to confirm that ongoing robust job growth supports higher interest rates.
The dollar has risen after statistics released on February 3 revealed that businesses gained 517,000 jobs in January. Analysts anticipate 203,000 job increases, with earnings rising 0.3% for the month and 4.8% on an annual basis.
According to the ADP National Employment Report released on Wednesday, private employment climbed by 242,000 jobs last month. Additional statistics revealed that job vacancies in the United States declined less than expected in January, while data from the previous month was revised higher.
Consumer price inflation statistics being out on Tuesday will also be critical in determining if the Fed accelerates the pace of rate increases. Prices are predicted to have increased by 0.4% in February.
The dollar index recently stood at 105.63 versus a basket of currencies, having earlier reached 105.88, its highest level since December 1. It has risen from a nine-month low of 100.80 on February 1 but remains significantly below a 20-year high of 114.78 on September 28.
"The dollar had a massive four-month selloff, and I think it still looks corrective in nature, that is, I don't think we're going to revisit the September and October dollar highs,"
The euro remained unchanged at $1.0547. It dropped to $1.0524 earlier in the day and is now trading barely above the year's low of $1.04820 set on January 6. The dollar gained 0.09% to 137.28 yen, having previously reached 137.90, its best level since December 15.
Sterling rose 0.09% to $1.1840 after sliding to $1.1805, its lowest level since Nov. 21. The Australian dollar was up 0.07% at $0.6588 after touching $0.6568 earlier, its lowest level since November 10.
The Canadian dollar sank as the Bank of Canada held its benchmark overnight rate at 4.50%, as predicted, becoming the first major central bank to pause its monetary tightening effort in the face of expected low inflation. The US dollar was recently up 0.34% with the Canadian dollar, trading at $1.3799 Canadian dollars.