The US dollar was stuck near a two-month low on Wednesday as weak economic data suggested the Federal Reserve was nearing the end of its tightening cycle, while the New Zealand dollar jumped after a larger-than-expected interest rate hike. New Zealand’s central bank on Wednesday raised interest by 50 basis points (bps) to a 14-year high of 5.25%, which surprised markets as 22 out of 24 economists in a Reuters poll only forecast a 25 bps hike. Imposed.
The kiwi touched a two-month high of $0.6383, up 1% after the decision. It was last up 0.74% at $0.636. Elsewhere, overnight data showed US job openings fell to their lowest level in nearly two years in February, suggesting labor market conditions were finally easing. Job openings, a measure of labor demand, were down 632,000 from 9.9 million on the last day of February, the Monthly Job Openings and Labor Turnover Survey, or JOLTS report showed. Economists polled by Reuters had forecast 10.4 million openings. The dollar index, which measures the currency against six peers, fell 0.5% overnight to a two-month low of 101.43. It was last on 101.53.
The euro was up 0.05% at $1.0958, down from a two-month high hit on Tuesday. Sterling was last at $1.2494, down 0.04% on the day, having declined from a ten-month high hit on Tuesday. Rodrigo Catril, a senior currency strategist at National Australia Bank, said the decline in job openings confirms a softening of US labor demand, with further declines expected in the coming months.
“Focus will turn to Friday’s key employment report, where the consensus is picking up another moderation in non-farm payrolls growth to 240K.” Markets have changed their view on rate hikes due to lower than expected jobs data. The CME FedWatch tool showed markets are now pricing in a 59% chance of the Fed standing pat on interest rates at its next policy meeting in May. Markets were pricing in a 43% chance of the Fed not raising interest rates a day earlier.
A Reuters poll of forex strategists showed the US dollar will weaken against most major currencies in 2023 as the interest rate differential with its peers narrows, turning the US currency defensive after a multi-year move. In the US bond market, the two-year Treasury yield, which typically moves in tandem with interest rate expectations, rose 2.6 basis points to 3.860% after sliding 14 basis points on Tuesday. The yield on 10-year Treasury notes rose 1.8 basis points to 3.355%, having slipped 9 basis points overnight. Federal Reserve Bank of Cleveland President Loretta Mester said Tuesday that while the economy is headed for a slowdown, the central bank’s chances of doing more are higher than before. The Australian dollar rose 0.18% to $0.676, a day after the Reserve Bank of Australia left its cash rate unchanged at 3.6%, halting 10 straight hikes, saying it needed more time to assess the impact of previous hikes. is required. The Japanese yen weakened 0.05% to 131.77 per dollar.
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