FOREX-Dollar rises, investors weigh rates and economy. – Rayrice Forex News

FOREX-Dollar rises, investors weigh rates and economy.

(All updates, refresh prices)

by Amanda Cooper

LONDON, Dec 8 (Reuters) –

The dollar rallied on Thursday, supported by higher pressure on U.S. Treasury yields as investors gauged the outlook for Federal Reserve policy as higher interest rates could lead to a decline.

Next week will bring major central bank decisions, including those from the Federal Reserve, the European Central Bank and the Bank of England.

A key question for traders and investors is whether inflation has peaked, giving policymakers ample opportunity to offer modest interest rate increases in the coming months.

The US monthly consumer price index is due next week, a day before the Fed’s policy meeting on December 14, and could be crucial in setting long-term expectations for monetary policy.

“Right now it’s US CPI that looks important for the broader dollar direction and not much is happening until we get those central bank meetings and one key monthly US data out,” said RBC currency strategist Adam Cole.

The dollar was broadly stable against a range of major currencies. The euro was last against the greenback at $1.0507, while the pound fell 0.3% to $1.2171.

The yen, highly sensitive to changes in US Treasury yields, fell 0.25% to 136.90, giving up some of Wednesday’s 0.4% gain.

The 10-year Treasury yield has fallen steadily since hitting a 15-year high in late October, dropping a full percentage point. In fact, that’s barely half the increase seen in August at a four-month low and around 4.34% in October.

Meanwhile, oil prices fell below $80 a barrel for the first time since Russia invaded Ukraine in late February.

Brent crude futures fell to $78, halved from a 14-year high of $139.13 in early March. The price of gasoline at the pump in the United States hit a record $5.016 in June, according to the

American Automobile Association

Now at $3.329, down 0.4% from where they were at this point last year.

Market-based inflation expectations have also relaxed as energy prices continue to decline. The 10-year inflation rate, which strips the inflation-linked Treasury yield on the nominal 10-year note, was just 2.27%, up from more than 3% in April.

Those two forces, which dampened expectations that the Fed will continue to raise interest rates at the same aggressive pace, saw the dollar depreciate 6.2 percent this quarter.

That’s down 8.5% since the third quarter of 2010, but puts the greenback on course for its worst quarterly performance since 2004, according to Refinitiv data.

Lee Hardman, currency strategist at MUFG, said in a note: “The price action highlights that market participants are becoming increasingly less concerned about risks to inflation and global growth.”

The 10-year yield rose 5bps to 3.45%, the lowest overnight in three months.

Financial markets show there is a 91% chance the policy-making Federal Open Market Committee will hike by half a point next week and only a 9% chance it will add another 75 basis points. Prices now appear to be up less than 5% in May.

Meanwhile, the yuan rose to a three-month high after China announced another easing of some of its most restrictive COVID restrictions.

The U.S. dollar rose more than 0.1% to 6.9670 yuan in offshore trade as the Chinese government announced the relaxation of some COVID-19 measures that have hit the economy hard.

(Additional reporting by Kevin Buckland in Tokyo; Editing by Simon Cameron-Moore and Kim Coghill)

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