Euro, yen climb as dollar rally pauses
U.S. jobless claims fall, supporting slower Fed rate cuts
ECB policymakers suggest gradual rate cuts amid inflation concerns
Japanese yen rises as Finance Minister warns against currency speculation
Updated at 11:15 a.m. ET/1515 GMT
By Chuck Mikolajczak
NEW YORK, Oct 24 (Reuters) -The euro and Japanese yen rose on Thursday as the U.S. dollar stalled after rallying to a nearly three-month high, but the greenback moved off earlier lows as datasupported views forslower rate cutsby the Federal Reserve.
Weekly initial jobless claims fell to 227,000, below the 242,000 estimate of economists polled by Reuters, while continuing claims rose to a three-year high. The Fed is likely to discount the climb this month due to distortions from Hurricane Helene.
A separate report from S&P Global said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to 54.3 this month from a final reading of 54.0 in September. A reading above 50 signals expansion.
The greenback has climbed in 16 of the past 18 sessions, on pace for its fourth straight week of gains, as a run of positive economic data has quieted expectations about the size and speed of the Fed's rate cuts, which has also lifted U.S. Treasury yields.
"We're looking at some profit-taking here," said Joseph Trevisani, senior analyst at FXStreet in New York.
"But underneath that, of course, has been the shift in rates and the shift in perception about what the Fed is going to do. And that hasn't changed so for the moment, we're kind of holding."
The dollar index =USD, which measures the greenback against a basket of currencies, fell 0.22% to 104.21, with the euro EUR= up 0.17% at $1.0799 after hittinga nearly four-month low of$1.076 on Wednesday.
A survey showed euro zone business activity stalled again last month, but the contraction in Germany, Europe's largest economy, was less steep than the previous month.
Recent comments from Fed officials have indicated the central bank will take a gradual approach to cutting rates.
Markets are pricing in a 96.5% chance for a cut of 25 basis points at the Fed's November meeting, with a 3.5% chance of the U.S. central bank holding rates steady, according to CME's FedWatch Tool. The market was completely pricing in a cut of at least 25 bps a month ago, with a 58.2% chance of a 50 bps cut.
In contrast,expectations for faster and potentially bigger rate cuts from the European Central Bank (ECB) have increased to weigh on the euro, after a host of policymakers warned about the risk of undershooting the central bank's 2% inflation target.
ECB policymakerRobert Holzmann said the central bank could cut rates by 25 basis points at its December meeting if circumstances including inflation allow it. Latvian central bank GovernorMartins Kazaks said inflation could fall quicker than expected but the ECB should stick to its practice of cutting rates step by step given the exceptional uncertainty.
The dollar has also benefited from a rise in market expectations for a victory next month by Republican candidate and former U.S. President Donald Trump, which would likely bring about inflationary policies such as tariffs.
Sterling GBP= strengthened 0.29% to $1.2958. British finance ministerRachel Reeves said she would change the measure of public debt that the government targets in next week's budget to allow more borrowing for investment.
Against the Japanese yen JPY=, the dollar weakened 0.58% to 151.86. Japanese Finance Minister Katsunobu Kato issued a warning against currency speculation on Wednesday, expressing concern over "one-sided, rapid" moves in the currency market that have been driving down the yen's value.
Japan's coalition government under new Prime Minister Shigeru Ishiba is at risk of losing its majority in parliament in Sunday's election, recent polls show, and any rise in political uncertainty would further complicate the Bank of Japan's plans for monetary policy normalisation.
BOJ Governor Kazuo Ueda said overnight it was "still taking time" to sustainably achieve the central bank's 2% inflation target, and signalled that rate hikes would be done "cautiously and gradually". But he also warned of the cost of moving too slowly, which could encourage speculators to push the yen lower.
In the upcoming election, polls show Prime Minister Shigeru Ishiba's Liberal Democratic Party may struggle to retain its parliamentary majority which could complicate monetary policy plans by the BOJ.
World FX rates https://tmsnrt.rs/2RBWI5E
US unemployment claims https://reut.rs/3NAqVAR
Reporting by Chuck Mikolajczak; Editing by Richard Chang
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
