Dollar hits one-month low as global rates soaring

The U.S. dollar fell on October 25 as traders weighed the prospect of inflation hastening the pace of rate hikes outside the U.S. Furthermore, investors are focused on U.S. growth data, commodity prices, and central bank meetings in Europe, Canada, and Japan.

The drop pulled the U.S. dollar index to a one-month low and extended softness. The decline came after Federal Reserve Chair Jerome Powell announced that it is not yet time to start raising interest rates.

The dollar declined by around 0.2% against the risk-sensitive currencies, the Australian and New Zealand dollars. Moreover, the currency dipped about 0.1% versus the euro to settle at $1.1659.

The U.S. dollar index dropped by 0.2% to 93.483. The safe-haven currency, the Japanese yen, declined slightly to 113.63 against the dollar.

Jerome Powell’s remarks came as investors have priced in Federal Reserve rate hikes starting in the second half of 2022.

The Antipodean currencies, along with the pound, have bounded ahead this month as traders struggled to price in higher rates while inflation runs hot. Remarkably, markets are now eyeing a near 60% chance of a Bank of England (BoE) hike next week.

The British pound rose by 0.2% against the dollar at $1.3781. However, the sterling, Australian, and New Zealand dollars are still below highs scaled last week. Analysts have started thinking that they are losing momentum.

In the U.S., Thursday’s GDP figures showed an anticipated slowdown

The Australian dollar was last at $0.7482 after increasing above $0.75 for the first time since July. Meanwhile, its New Zealand counterpart traded at $0.7161 after hitting as high as $0.7219 last week.

Investors are waiting for Australian inflation data, which is due on Wednesday. It is expected to set the tone for the next stage in a brawl between traders as a resolutely dovish central bank.

Increasing housing costs and soaring food and fuel prices have tapering in the frame when Canada’s central bank meets on Wednesday. Moreover, oil touched a new three-year peak on Monday.

In the U.S., Thursday’s GDP figures showed an anticipated slowdown could take pressure from the Fed, even while inflation runs quite hot.

The Bank of Japan (BoJ) and the European Central Bank (ECB) are not expected to adjust policy when they meet on Thursday. However, in Europe, market gauges of projected inflation are increasingly at odds with the bank’s guidance.

Furthermore, cryptocurrencies were steady below the heights hit last week, when the dominant cryptocurrency surged 2% at $62,000.