Currencies

Most Asian currencies weakened on Wednesday as uncertainty over U.S. interest rates and the upcoming presidential elections kept traders risk-averse, while the dollar remained at a near three-month high.

Four Federal Reserve policymakers on Monday backed further reductions in interest rates following the central bank’s decision to cut borrowing costs by an outsized 50 basis points in September.

The dollar climbed on Monday, buoyed by a rise in U.S. bond yields, as solid U.S. economic data suggested the Federal Reserve can afford to be patient in cutting rates while investors positioned for the Nov. 5 presidential election.

The U.S. dollar firmed on Wednesday, hitting an 11-week high, as investors ruled out a hefty interest rate cut from the Federal Reserve at the next policy meeting and priced in a potential election victory by former President Donald Trump.

A new USD-positive over the past week has been media reports of somewhat better outlook for Donald Trump in the latest polls, as outcomes that allow for policies such as more aggressive tariffs are viewed as more USD positive. 

The US currency has been in demand in recent weeks as employment and inflation readings spurred bets on a slower pace of rate cuts by the Fed, after the central bank cut rates by a hefty 50 basis points in September and announced the start of an easing cycle.

The U.S. dollar hit a nine-week high on Monday in thin trading, continuing its bullish trend in the last few weeks, triggered by economic data that, while trending lower, remained stable overall.

Britain’s economy now looks on track for a third consecutive quarter of economic growth. The ONS said data for September GDP would need to show a month-on-month fall of 0.3% to 0.6% to generate a flat quarterly reading, assuming no revisions to existing figures.

The New Zealand dollar slumped on Wednesday after the country’s central bank cut interest rates by 50 basis points, while the U.S. dollar nudged up against most currencies and hit a new near two-month high on a basket of peers.

 The U.S. dollar stabilized Monday, holding onto the gains seen after Friday’s strong jobs report at the start of a week that includes the release of key inflation data as well as the minutes from the last Federal Reserve meeting.