Chance of increase by year-end has fallen from close to 50%
Investors await minutes of the Fed’s July policy meeting
The dollar extended last week’s decline as investors became less optimistic about a 2016 interest-rate increase before the release of the minutes of the Federal Reserve’s July meeting.
The chance of the Fed raising rates before the year is out have fallen to 45 percent, from just shy of 50 percent before stagnant retail-sales data on Friday cast doubt over the strength of the U.S. recovery. The odds, as measured by futures data tracked by Bloomberg, had started to climb after a better-than-forecast jobs report the previous week. That data pushed Treasury yields higher, supporting the dollar.
“A week ago, U.S. yields spiked up on the back of the really strong payrolls, but since then they’ve actually given back quite a bit,” said Steven Saywell, head of currency strategy at BNP Paribas SA in London. “So the market has taken back expectations for the Fed to hike.”
Still, he said, there’s still reason to be optimistic about the greenback. The Fed is due Wednesday to publish the minutes of its July 26-27 meeting, when it upgraded its assessment of the U.S. economy while signaling it’ll take a gradual approach toward tightening policy.
“The Fed is biased toward hiking, and for them not to hike, you need some kind of headwinds or for them to be nervous about downside risks to the economy,” Saywell said. “Yields may jump up again, and the dollar could do well.”
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, fell 0.2 percent as of 8:49 a.m. in New York, extending last week’s 0.7 percent slide. On Friday, it reached the lowest since June 24, the day the U.K. announced it had voted to leave the European Union.
The yen strengthened 0.2 percent to 101.15 per dollar, extending three weeks of gains.
By John Ainger johnainger
– Bloomberg
Investors await minutes of the Fed’s July policy meeting
The dollar extended last week’s decline as investors became less optimistic about a 2016 interest-rate increase before the release of the minutes of the Federal Reserve’s July meeting.
The chance of the Fed raising rates before the year is out have fallen to 45 percent, from just shy of 50 percent before stagnant retail-sales data on Friday cast doubt over the strength of the U.S. recovery. The odds, as measured by futures data tracked by Bloomberg, had started to climb after a better-than-forecast jobs report the previous week. That data pushed Treasury yields higher, supporting the dollar.
“A week ago, U.S. yields spiked up on the back of the really strong payrolls, but since then they’ve actually given back quite a bit,” said Steven Saywell, head of currency strategy at BNP Paribas SA in London. “So the market has taken back expectations for the Fed to hike.”
Still, he said, there’s still reason to be optimistic about the greenback. The Fed is due Wednesday to publish the minutes of its July 26-27 meeting, when it upgraded its assessment of the U.S. economy while signaling it’ll take a gradual approach toward tightening policy.
“The Fed is biased toward hiking, and for them not to hike, you need some kind of headwinds or for them to be nervous about downside risks to the economy,” Saywell said. “Yields may jump up again, and the dollar could do well.”
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, fell 0.2 percent as of 8:49 a.m. in New York, extending last week’s 0.7 percent slide. On Friday, it reached the lowest since June 24, the day the U.K. announced it had voted to leave the European Union.
The yen strengthened 0.2 percent to 101.15 per dollar, extending three weeks of gains.
By John Ainger johnainger
– Bloomberg
