NEW YORK: The dollar was mixed on Monday before a week heavy with speeches by Federal Reserve officials that will be watched for further clues on interest rate policy and as investors monitored developments in the Middle East.
Traders are evaluating whether the US central bank may hike interest rates again as it battles to bring inflation closer to its 2% annual target.
“The market is going to be focused on do we get a reacceleration in the economy early next year and does that feed into inflationary pressures,” said Edward Moya, senior market analyst at OANDA in New York.
“The market is kind of getting confident that the Fed is done raising rates, but we’ll see if geopolitical risks … if the global energy crisis complicates what happens with inflation throughout the winter.”
Fed Chairman Jerome Powell will speak on Thursday, during a busy week of speeches by regional bank heads. Fed officials will enter into a blackout period on Oct. 21 before the Fed’s Oct. 31–Nov. 1 meeting.
Fed funds futures traders are pricing in a 31% chance of an additional interest rate hike this year, according to the CME Group’s FedWatch Tool.
The dollar index fell 0.08% to 106.47. It reached 107.34 on Oct. 3, the highest since Nov. 2022.
The euro gained 0.18% to $1.0530. It fell to $1.0448 on Oct. 3, the lowest since December 2022.
The Israeli shekel weakened to a more than eight-year low of 3.994 against the greenback as the war between Israel and Hamas continued.
Israeli forces kept up their bombardment of Gaza on Monday after diplomatic efforts to arrange a ceasefire to allow foreign citizens to leave and aid to be brought into the besieged Palestinian enclave failed.
The Bank of Israel said last week it will sell up to $30 billion of foreign currency in the open market to maintain stability in the currency and “to provide the necessary liquidity for the continued proper functioning of the markets.”
Traders also remain focused on the Japanese yen for potential intervention in the currency.
The dollar rose 0.11% against the yen to 149.73, close to the sensitive 150 level. Some traders see an increased potential for Japanese authorities to intervene to support the currency if it weakens past that level.
It reached 150.17 on Oct. 3, the weakest in a year, before rallying sharply.
On Friday, Japan’s top currency diplomat Masato Kanda said authorities will take appropriate action against a backdrop of excessive moves in the yen when needed, adding interest rates are merely one factor in determining exchange rates.
Poland’s zloty rallied to 4.2316 against the US dollar, the strongest since Sept. 6.
Poland’s liberal, pro-EU opposition on Monday looked on track to form the next government after official partial results and exit polls showed the ruling nationalists losing their parliamentary majority.
The New Zealand dollar rose 0.45% to $0.5910.
The country’s center-right National Party will form a new government with its preferred coalition party ACT.