Dollar Inches Toward One-Year High

The US dollar nudged back toward a one-year high against major rivals on Tuesday. This was ahead of a critical payrolls report at the end of the week. It could strengthen the case for the Fed to begin withdrawing stimulus as soon as next month. The safe-haven dollar was also bolstered by a stock market sell-off that stretched from Wall Street to Asia.

The risky Australian dollar was among the greatest losers. The Reserve Bank of Australia stated that it does not intend to hike interest rates until 2024, after holding policy stable as expected. The US dollar index measures the currency against six rivals. It increased 0.13 percent to 93.957, returning to Thursday’s high of 94.504, its best since late September 2020. Since September 3, the index has risen as high as 2.8 percent. This resulted from traders’ racing to price in tapering this year and probable rate hikes in 2022.

The dollar has also benefited from haven demand despite concerns ranging from global stagflation to the United States’ debt ceiling crisis.

The dollar began the week on the back foot, failing to advance on yet another equities sell-off and suffering from OPEC+’s decision to continue modest supply hikes. According to a Reuters survey, Friday’s non-farm payrolls data is projected to indicate ongoing progress in the labor market, with 488,000 jobs added in September.

Currencies

On Monday, the Australian dollar slid 0.34 percent to $0.7263, dropping from a four-day high of $0.73045. The New Zealand dollar slipped 0.34 percent to $0.6939 after reaching a four-day high of $0.6981. On Wednesday, the Reserve Bank of New Zealand will declare its policy, with markets expecting a quarter-point rate increase. Meanwhile, an Asia-Pacific equity index fell 0.92 percent, following a 1.3 percent drop in the S&P 500 overnight.

The RBA’s steady on-hold stance weighs on the AUD,” Commonwealth Bank of Australia strategist Joseph Capurso said in a research.

The dollar gained 0.25 percent to 111.19 yen, while the euro lost 0.21 percent to $1.15965. The value of the pound remained constant at $1.3612.

The mainstream expects the dollar to rise further, with speculators increasing net long bets to the most significant level since March 2020. However, TD Securities warns that headroom may be limited.

While the near-term USD bias leans higher, Mark McCormick wrote in research that we’re apprehensive about chasing the move at these levels.