US dollar eases as month-end flows weigh; eyes are on Fed and BOJ

THE US dollar edged down against a basket of currencies on Friday (Oct 27), pulled down by portfolio rebalancing, but was on track to end the week higher as fresh data reinforced the view the US economy remains on a firm footing.

US consumer spending rose more than expected in September, signalling a strong fourth quarter, while monthly inflation was elevated, data on Friday showed.

The dollar index was 0.07 per cent lower at 106.5, with analysts attributing some weakness to currency trading to rebalance portfolios. The index was up 0.4 per cent for the week.

Forex moves were muted ahead of the coming Federal Reserve and Bank of Japan policy meetings.

Cooling inflation will likely keep the Fed on pause in coming months, traders bet on Friday, even as persistent underlying price pressures amid strong consumer spending kept some chance of a rate hike later this year in play.

The European Central Bank on Thursday left interest rates unchanged as expected, ending an unprecedented streak of 10 consecutive rate hikes.

The euro was 0.12 per cent higher at US$1.0573 on Friday. Data showed eurozone business activity took a surprise turn for the worse this month.

Overall risk sentiment improved a little on Friday with the Australian dollar, often used as a proxy for risk appetite, climbing 0.25 per cent to US$0.6338, having slid to a one-year low of $0.6271 on Thursday.

The yen pulled back from 150 per dollar, a level some have seen as a potential trigger for intervention by the Japanese authorities. Dollar/yen was 0.6 per cent lower at 149.515..

SEE ALSO

US dollar rises after blockbuster US data lures in bulls

Japan will continue to respond to the currency market “with a strong sense of urgency,” Finance Minister Shunichi Suzuki told reporters on Friday. REUTERS