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FOREX-Dollar set for biggest rise in three weeks as Fed eyed

Published 14/06/2019, 11:53
© Reuters.  FOREX-Dollar set for biggest rise in three weeks as Fed eyed
DXY
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* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, June 14 (Reuters) - The dollar rose on Friday and
was set for its biggest weekly gain in three weeks as investors
squared up for a U.S. central bank meeting next week where
policymakers might signal when it plans to cut interest rates
for the first time in a decade.
But with bets on U.S. interest rates swinging massively -
market expectations are now for three rate cuts until end-2019,
versus three hikes foreseen just six months ago - investors are
growing cautious that policymaker rhetoric might underwhelm.
"There is a risk that the Fed might not be as dovish as what
markets expect next week," said Fritz Louw, a currency
strategist at MUFG Bank based in London.
Markets are pricing in about a 33% probability of a quarter
point rate cut next week and as many as 73 basis points in
cumulative rate cuts through the end of the year.
Against a basket of its rivals .DXY , the dollar rose 0.1%
to a one-week high of 97.09.
Elsewhere, the Australian and New Zealand dollars fell as
bets on interest rate cuts undermined demand as a Group of 20
meeting later this month kept investors sidelined.
The Aussie AUD=D3 fell 0.24% to $0.6892 and was down 1.5%
for the week, the biggest decline since mid-May. The Kiwi dollar
NZD=D3 dropped 0.4% to $0.6529, down 2% for the week.
Bond futures RBAWATCH imply a 66% probability the Reserve
Bank of Australia will follow up its recent quarter-point easing
with another in July. If not, a reduction to 1% is considered
certain by August 0#YIB: .
Markets were also raising bets of a rate cut by the Reserve
Bank of New Zealand.
The weakness in the Australian dollar has pushed investors
to unwind some of their carry trades, where speculators borrow
in a low-yielding currency such as the Swiss franc and invest in
relatively higher-yielding ones such as the Australian dollars.
The Australian dollar/Swiss franc cross, a barometer for
such speculative bets, has fallen nearly 6% in eight weeks,
indicating hedge funds were losing money on such bets.



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Rate Cuts by central banks https://tmsnrt.rs/2Igfo8O
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