‘Beige Book’ report from the Fed, comments from Fed Chairwoman Collins, and price updates) Unexpected gains in the U.S. ISM services index; three-month lows for the euro and sterling against the dollar following the data; a softening economy as indicated by the Fed’s “Beige Book” Written by Gertrude Chavez-Dreyfuss Reuters, NEW YORK, Sept. 6 – After U.S. statistics revealed the services sector suddenly picked up momentum last month amid an increase in new orders and businesses paying higher prices, the dollar rose to a six-month high on Wednesday, reversing earlier losses.
indicating ongoing inflationary pressure. Following the release of the data, the dollar strengthened versus the majority of other currencies, with the yen touching session lows and the euro and sterling falling to three-month lows. However, as volume decreased in the afternoon, the value of the dollar slightly declined. The dollar index touched a new six-month high of 105.03 earlier and was last trading at 104.84, up 0.1%. Following the release of the report, the euro and pound both hit three-month lows and were last trading flat at $1.0726 and down 0.5% at $1.2505, respectively. According to data, the non-manufacturing PMI of the Institute for Supply Management (ISM) increased to 54.5 last month, the highest level since February, from 52.7 in July. Reuters’ survey of economists had predicted that the non-manufacturing PMI would fall to 52.5. Clearly, the U.S.
The economy is still far stronger than most of the other G10 countries’ and has a lot lower chance of going into a recession, according to Helen Given, an FX trader at Monex USA in Washington. Investors “really have little choice but to place their faith in the U.S. (economy) given that the UK and the eurozone are teetering on the edge of true contraction.” The information suggested that interest rates would stay high for longer, but it did not change predictions that the Federal Reserve will stop raising rates at a meeting later this month.
According to the CME’s FedWatch, the likelihood of a rate hike for the November and December policy meetings rose to 48.4% and 46.6%, respectively, on Wednesday. Late on Tuesday, those probabilities were 45.2% for November and 43.5% for December. However, Fed policymakers have adopted a more dovish stance during the past two days, indicating that the American central bank may decide to take another break for the next several meetings in order to better evaluate how monetary tightening is affecting economic statistics. Susan Collins, president of the Boston Fed, stated on Wednesday that the institution will move cautiously when it comes to its upcoming monetary policy actions. She made her statements after Tuesday’s identical ones made by Fed Governor Christopher Waller.
“There’s nothing that is saying we need to do anything imminent anytime soon,” Waller said in a CNBC interview. “So we can just sit there, wait for the data, and see if things continue” on their current course. The dollar pared its losses when compared to the yen, closing slightly changed at 147.69 yen. It increased earlier in the session to 147.82, its lowest level since November 4. The currency market is still keeping an eye out for yen intervention, though. The sharpest warning since mid-August, Masato Kanda, Japan’s top currency diplomat, said they won’t rule out options if speculative moves continue. This caused the yen to increase to as much as 147.02 per U.S. dollar.
The attempts of Japan to stop the rapid depreciation of the yen since last year have been spearheaded by Kanda, the country’s vice-minister of finance for foreign relations. When the dollar climbed beyond 145 yen a year ago, Japan interfered in the currency markets, causing the Ministry of Finance to purchase the yen and lower the pair to about 140 yen. When the currency pair hit 150 yen in October of last year, it again interfered. The Federal Reserve also unveiled its infamous “Beige Book”—a picture of the American economy—on Wednesday. According to the research, economic growth has slowed down recently, and inflation has decreased across most of the nation. The dollar didn’t respond much to the report.