Dollar Mixed as Investors Await Fed Speeches and Monitor Middle East Developments
Dollar’s Performance and Interest Rate Policy
The dollar displayed mixed performance on Monday as investors awaited speeches by Federal Reserve officials to gain further insights into interest rate policy. Additionally, market participants closely monitored developments in the Middle East. The focus remains on whether the U.S. central bank will raise interest rates again in its efforts to bring inflation closer to the targeted 2% annual mark. Edward Moya, senior market analyst at OANDA in New York, highlighted the market’s anticipation for a reacceleration in the economy early next year and its impact on inflationary pressures.
Fed Officials’ Speeches and Rate Hike Expectations
The upcoming week is filled with speeches by regional bank heads, including Federal Reserve Chairman Jerome Powell on Thursday. However, after October 21, Fed officials will enter a blackout period before the Fed’s October 31-November 1 meeting. Currently, Fed funds futures traders are pricing in a 31% chance of an additional interest rate hike this year, according to the CME Group’s (NASDAQ:) FedWatch Tool.
Dollar’s Performance Against Major Currencies
The dollar weakened by 0.08% against the yen, reaching 106.47, after reaching a high of 107.34 on October 3, the highest level since November 2022. Meanwhile, the euro gained 0.18% against the dollar, reaching $1.0530. The Israeli shekel weakened to its lowest level in over eight years, trading at 3.994 against the greenback, amid the ongoing conflict between Israel and Hamas.
Focus on Japanese Yen and Potential Intervention
Traders are keeping a close eye on the Japanese yen for signs of potential intervention in the currency. The dollar rose by 0.11% against the yen, reaching 149.73, approaching the sensitive 150 level. Some traders believe that Japanese authorities may intervene to support the currency if it weakens further. Previously, the yen reached its weakest level in a year, trading at 150.17 on October 3, before experiencing a sharp recovery.
Developments in Poland and New Zealand
Poland’s zloty rallied to its strongest level since September 6, trading at 4.2316 against the U.S. dollar. This follows official partial results and exit polls indicating that Poland’s liberal, pro-EU opposition is on track to form the next government, with the ruling nationalists losing their parliamentary majority. In New Zealand, the National Party, a center-right party, is set to form a new government with its preferred coalition party ACT.
As the week progresses, market participants will closely analyze speeches by Federal Reserve officials for hints on interest rate policy. Additionally, geopolitical risks in the Middle East and global energy crisis will continue to influence investor sentiment. The dollar’s performance against major currencies, potential intervention in the Japanese yen, and political developments in Poland and New Zealand will be key areas of focus.