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Sydney - A gauge of the dollar halted a two-day decline as investors awaited a report on durable goods orders to assess the outlook for US rates.
The odds that the Federal Open Market Committee will increase rates in December have dropped to about even, from 61% a week ago, when chair Janet Yellen said it made sense to put off a move for now to give the economy more room to grow.
The yen fell for a second day as demand for haven assets waned after the first US presidential debate between Hillary Clinton and Donald Trump.
“The market was volatile yesterday pre and post the first US presidential debate and many investors were stopped out of short term trades,” said David Forrester, a foreign-exchange strategist at Credit Agricole SA’s corporate and investment-banking unit in Hong Kong.
“The dollar is likely to be subject to some temporary downside risk ahead of the US presidential election and will be especially dependent on the opinion polls.”
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, added 0.1% at 08:13, after sliding 0.4% in the previous two sessions. The yen weakened 0.2% to ¥100.59/$, extending yesterday’s 0.1% drop.
Fed moves
Federal Reserve vice chairperson Stanley Fischer said on Tuesday low interest rates have helped deliver US labour market gains that are feeding through to higher wages.
While he didn’t discuss the timing of any increase in borrowing costs, he said the move in wage inflation from about 2% last year to about 2.5% this year provides evidence the connection between unemployment and inflation, which looked less convincing over the past decade, still exists.
“With the FOMC clearly data-and financial conditions-dependent, pricing for a December hike is unlikely to rise much above the roughly 50% chance currently reflected in futures markets,” BNP Paribas SA analysts led by Steven Saywell, the global head of foreign-exchange strategy in London, wrote in a note. “We continue to see scope for dollar-yen to fall below 100 in the near-term.”
Durable goods orders in the US decreased 1.5% last month, according to the median economist estimate in a Bloomberg survey, after rising 4.4% in July.
Citigroup’s US Economic Surprise Index fell below zero on September 20 and has remained negative since then. A level below zero indicates data in the nation are falling short of forecasts.
The yen fell on Tuesday from a one-month high as demand for haven’s declined as a CNN poll showed that 62% of voters who watched said Clinton won the debate compared to 27% for Trump. A Bloomberg Politics poll ahead of the event had the candidates deadlocked, clouding the outlook for US policy.
