WIDE RANGE OF INSTRUMENTS

The dollar was flat Tuesday, and experts suggest that the greenback could struggle to advance as the improved pandemic backdrop may sour investor appetite for the safe-heavens including the greenback.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell 0.07% to 93.19

The U.S. dollar has been riding a wave of safe-heaven demand as investors contend with economic headwinds including the difficulties in China. But in the near term, “the U.S. dollar is expected to slip slightly lower as pandemic uncertainties gradually recede,” Desjardins said.  

While the Federal Reserve’s plan to tighten its monetary policy measures could help offset less favorable factors for the greenback, such as a wide trade deficit and a higher inflation, the boost to the dollar from Fed tightening isn’t expected to be as meaningful as many expect.

“The dollar is threatened with trouble on two fronts: a slowdown in economic momentum combined with falling inflation should put an end to speculation about interest rate hikes fairly quickly – perhaps even faster than we expect,” Commerzbank said.

The Federal Reserve kicked off its two-day meeting on Tuesday, and is expected to keep its benchmark rate unchanged when its delivers its monetary policy statement on Wednesday.

But with the Fed’s plan to taper largely priced in, a raft of updates to the central bank’s economic and interest rate projections are likely to be closely watched.

“The SEP [summary of economic projections] is likely to show an expectation for still solid growth and elevated inflation,” Jefferies said.  “The dots, meanwhile, are likely to show an array of opinions regarding the timing of the first rate increase.”

The dollar edged lower Tuesday, with traders waiting for the release of the latest U.S. inflation numbers for guidance on the timing of the start of the Federal Reserve’s stimulus withdrawal.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded marginally lower at 92.627, having retreated from Monday’s two-week high of 92.887. 

USD/JPY rose 0.1% to 110.09, EUR/USD was flat at 1.1808, having bounced back from Monday’s low of 1.1770, its lowest since Aug. 27, while GBP/USD edged higher to 1.3838, helped by U.K. employment data showing that the total number of payrolled employees climbed in August above their level in February 2020, just before Britain first went into Covid-19 lockdown.

The main focus Tuesday will be on the release of the U.S. consumer price data, at 8:30 AM ET (1230 GMT), especially with the Federal Reserve’s next policy review being so close, on Sept 21-22.

Annual consumer price inflation is expected to dip slightly to 5.3% from 5.4% in July, while core CPI, an index which strips out volatile energy and food prices, is seen easing slightly annually to 4.2% from 4.3% in July.

“Recent Fed communication has not diverged from the view that inflationary pressures have a transitory nature, so even in the event of another rise in inflation we doubt Fed rate expectations – and by extension, the dollar – will be particularly impacted,” said analysts at ING, in a note.

The Wall Street Journal reported on Friday that Fed officials will seek an agreement to begin paring bond purchases in November.

Elsewhere, the risk sensitive AUD/USD dropped 0.4% to 0.7335, after Australian central bank chief Philip Lowe pushed back against market pricing for early interest-rate increases.

“I find it difficult to understand why rate rises are being priced in next year or early 2023,” Lowe said earlier Tuesday. “While policy rates might be increased in other countries over this time frame, our wage and inflation experience is quite different.”

The dollar drifted within recent ranges against major peers on Wednesday after softer-than-expected U.S. inflation raised doubts about a taper of Federal Reserve stimulus this year.

The dollar index stood at 92.632, little changed from Tuesday, when it dropped following the inflation data only to recover on haven demand as stocks slid on Wall Street.

The index has meandered between 92.3 and 92.9 over the past week as several Fed officials have suggested the U.S. central bank could reduce its buying of debt securities by the end of the year, even after a much-weaker-than-expected payrolls report at the start of the month.

While elevated inflation has kept pressure on policymakers, data overnight showed the U.S. consumer price index, excluding the volatile food and energy components, edged up just 0.1% last month.

The Fed holds a two-day monetary policy meeting next week, with investors keen to find out whether a tapering announcement will be made.

Tapering tends to benefit the dollar as it suggests the Fed is one step closer toward tighter monetary policy. It also means the central bank will be buying fewer debt assets, effectively reducing the number of dollars in circulation.

“The softer print eases concerns over an imminent acceleration in prices and should nullify any lingering pressure on the Fed to taper in September,” Rodrigo Catril, a senior currency strategist at National Australia Bank, wrote in a client note.

“But a taper this year still looks like a good bet with November or December now looking more likely.”

Even so, NAB predicts that the focus of global growth is shifting away from the United States, pushing the currency down to $1.23 versus the euro by year-end.

One euro bought $1.1808 on Wednesday, mostly flat from the previous session.

European Central Bank Chief Economist Philip Lane speaks at the IMFS webinar later in the global day.

The dollar slipped slightly to 109.595 yen, keeping close to the centre of the trading range of the past two months.

The U.S. currency edged higher against its antipodean rivals though, adding 0.1% to $0.7316 per Aussie and rising about the same margin to $0.7088 to New Zealand’s kiwi.

Commonwealth Bank of Australia is more bullish on the dollar’s prospects, predicting that accelerating employment costs in the United States will keep consumer prices elevated.

“Above‑target inflation will prove more persistent than the FOMC expects,” Carol Kong, a strategist at CBA, wrote in a report.

“The implication is the FOMC will likely need to raise the Funds rate by more than what markets are currently expecting, which could support the USD down the track.”

Don’t read too much into the euro’s recent bout of strength — its headwinds are continuing to swirl.

The common currency has advanced nearly 2% since Aug. 20 as dovish signals from the Federal Reserve weighed on the dollar. Yet with the European Central Bank’s policy decision just around the corner, and the pandemic damping the prospect of a hawkish shift, it may be running out of steam.

“The risks are skewed toward a lower euro-dollar pair because it’s been rallying and I think the ECB will out-dove market expectations,” said James Athey, investment director at Aberdeen Asset Management, who is short the shared currency.

But a hawkish tilt could also weigh on the euro, Athey said. The BTP-bund spread has narrowed to around 100 basis points this week, from close to 120 in May. Should the central bank surprise investors by scaling back stimulus faster than they expect, this risk gauge would widen again, weighing on appetite for the common currency.

Signs are mounting that the euro is bumping up against a ceiling. The euro-dollar pair is seen trading little changed at $1.19 by year-end, according to the median forecast of 84 analysts. It fluctuated close to that level on Tuesday. 

The euro could test $1.20 this week, its highest since late June, but it may require a bigger surprise than anything the ECB can offer to break out of its current range, said Kit Juckes, chief foreign-exchange strategist at Societe Generale in London. “The best I can hope for is ‘steady as she goes,’” he said. 

To be sure, there are still bulls out there. At Australia & New Zealand Banking Group Ltd., senior international economist Brian Martin sees the ECB scaling back bond buying soon, which could help the euro to rise.

Until now, the ECB has insisted that any surge in consumer prices is destined to be temporary, allowing officials led by President Christine Lagarde to keep crisis stimulus flowing. That contrasts with global counterparts such as the Federal Reserve, which has flagged the need to start talking about scaling back.

The currency will likely push higher if the ECB announces that it will taper its monthly asset puchases, but this is unlikely to last, according to Jane Foley, head of foreign exchange at Rabobank. “Lagarde will likely be keen to underpin the ECB’s dovish credentials and may try and avoid using the term ‘taper’ altogether,” she said.

The dollar hovered near a one-week peak on Wednesday against major peers, buoyed by higher Treasury yields and a weaker euro amid caution before a European Central Bank policy decision.

The dollar index, which measures the currency against six rivals, was little changed at 92.553, just below Tuesday’s high of 92.571, a level not seen since Sept. 1.

The euro was almost flat at $1.18430 after dipping to $1.18375 in the previous session for the first time since Sept. 2.

The greenback maintained its biggest gain in a month versus Japan’s currency from overnight, trading little changed at 110.28 yen after being lifted by higher U.S. yields.

The benchmark 10-year Treasury note rose as high as 1.385% on Tuesday for the first time since mid-July, a climb of almost 6 basis points from Friday’s close. Monday was a U.S. holiday.

The dollar index had tumbled to its lowest levels since early August at the end of last week, when a surprisingly soft U.S. payrolls report prompted speculation the Federal Reserve will forgo announcing a taper of stimulus at a policy meeting this month.

The U.S. central bank may also have reason to pause with COVID-19 deaths surging in the country. Reuters data shows that more than 20,800 people died from the virus in the past two weeks, up about two thirds from the prior period. President Joe Biden will outline a plan to tackle the highly contagious Delta variant on Thursday.

“Risk aversion in the air alongside the move up in UST yields have helped the USD extend its post-payrolls recovery,” Rodrigo Catril, a senior foreign-exchange strategist at National Australia Bank, wrote in a client note.

“Investors are wary of the ECB meeting on Thursday, anticipating a potential trim to the PEPP (Pandemic Emergency Purchase Programme) bond-buying pace.”

Analysts polled by Reuters see PEPP purchases falling possibly as low as 60 billion euros a month from the current 80 billion, before a further fall early next year and the scheme’s end in March.

Elsewhere, the Reserve Bank of Australia’s decision on Tuesday to forge ahead with a taper of bond purchases while adding the dovish concession of extending the programme to February, helped undermine the Aussie dollar, which was little changed at $0.73885 on Wednesday, maintaining the previous session’s 0.7% slide.

New Zealand’s kiwi also suffered overnight, trading little changed at $0.7107 following an almost 0.5% decline.

Canada’s loonie was mostly flat at C$1.26415 per greenback after tumbling about 0.9% overnight.

Lower oil prices weighed, while investors anticipate a dovish narrative from the Bank of Canada’s policy meeting later Wednesday following an unexpected economic contraction last quarter, NAB’s Catril said.

Meanwhile, cryptocurrencies struggled on Wednesday to rebound from hefty losses suffered overnight, when several trading platforms saying they experienced performance issues, although it was not clear if these were a contributor to, or a result of, the volatility.

Bitcoin traded around $47,000 after sinking as low as $42,900.01 on Tuesday. Earlier that day it had touched an almost four-month high of $52,956.47.

The dollar edged higher Wednesday, but remains near its lowest point in three weeks, after weak economic data out of both China and the Eurozone.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 92.745, after dropping on Tuesday as low as 92.395 for the first time since Aug. 6.

EUR/USD fell 0.1% to 1.1799, after climbing to 1.1845 in the previous session, the highest since Aug. 5, USD/JPY was up 0.2% at 110.22, GBP/USD edged higher to 1.3757, and the risk sensitive AUD/USD climbed 0.2% to 0.7330.

China’s Caixin manufacturing purchasing managers index fell to 49.2 in August, below the 50-mark indicating growth, contracting for the first time since April 2020.  The [[elease points to slowing growth momentum in the world’s second-largest economy after China imposed strict measures to bring new virus cases under control last month. USD/CNY edged higher to 6.4617.

A further sign of slowing momentum was evident in Germany, where retail sales slumped 5.1% on the month in July, much more than expected. Despite that, upbeat comments from European Central Bank vice president Luis de Guindos and policymakers Robert Holzmann and Klaas Knot all pointed to the possibility of ECB policy turning slightly more restrictive toward the end of the year.

However, it is the August U.S. employment report, due on Friday, which remains uppermost in minds.

“At this stage, it appears that a September tapering announcement will highly depend on this week’s U.S. jobs data,” said analysts at ING, in a note. “Another strong number should give some support to the dollar which has otherwise remained broadly offered since the start of this week.”

The payrolls are widely expected to increase by around 750,000 in August, a strong number, but this would still represent a drop from the growth of 943,000 the previous month. ADP’s survey of private-sector hiring is due at 8:15 AM ET (1215 GMT).

The dollar was hit by comments from Federal Reserve Chair Jerome Powell on Friday, who indicated that the central bank was still likely to start to reduce its asset purchases this year but had no plans to start lifting interest rates anytime soon.

“There is an urge at the FOMC to de-link tapering and tightening,” added ING, and this “ultimately weighed on the dollar given the uncertainty around a 2022 rate hike (which, however, remains part of our economist’s forecasts).”

Also weighing on the greenback was Tuesday’s U.S. Conference Board consumer confidence index release, which came in at a six-month low.

The dollar was up on Wednesday morning in Asia but was trading near its lowest point in nearly three weeks. Investors continued to keep moves small, with the latest U.S. jobs report, which could provide clues to the U.S. Federal Reserve’s asset tapering timeline, due on Friday. The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.10% to 92.730 by 11:25 PM ET (3:25 AM GMT). It fell as low as 92.395 for the first time since Aug. 6 on Tuesday. The USD/JPY pair edged up 0.16% to 110.19. The AUD/USD pair inched down 0.01% to 0.7314. The Australian GDP grew 9.6% year-on-year and 0.7% quarter-on-quarter in the second quarter of 2021.The NZD/USD pair inched down 0.06% to 0.7040. The USD/CNY pair inched up 0.04% to 6.4633, with China’s Caixin manufacturing purchasing managers index (PMI), at a disappointing 49.2 in August, below the 50-mark indicating growth. The GBP/USD pair edged down 0.11% to 1.3739. After climbing to a nine-and-a-half month high of 93.734 on Aug. 20, the greenback has since been on a downward trend as some Fed officials suggested that asset tapering would not begin imminently. While Fed Chairman Jerome Powell said that asset tapering could begin in 2021 at the previous week’s Jackson Hole symposium, he did not provide a concrete timetable. Cleveland Fed President Loretta Mester also said on Monday that she was not yet convinced that recent inflation data satisfied the central bank’s price stability goal. On the data front, the U.S. Conference Board (CB) consumer confidence index was 113.8, a six-month low, while the S&P/Case-Shiller 20 n.s.a. house price index composite grew a record 19.1% in June. With labor market recovery one of the Fed’s conditions to begin asset tapering, investors will be paying attention to the latest U.S. jobs report that includes non-farm payrolls, due out of Friday. “The dollar uptrend is over for the time being at least,” after Powell successfully separated the debate over taper timing from any decisions about higher rates, National Australia Bank head of foreign exchange strategy Ray Attrill said in a note. “Positive price action” in the Australian and New Zealand dollars since their Aug. 20 lows suggests “a base has now been formed for both currencies,” the note added.

By Nqobile Dludla JOHANNESBURG (Reuters) – South Africa-based retailer Steinhoff said its half-year core earnings rose by 7%, as demand for value lines and a focus on home furnishings offset the impact of pandemic restrictions. During Steinhoff’s October to March reporting period many countries in Europe tightened restrictions or re-imposed lockdowns which hit its in-store operations and trading hours. Despite this, Steinhoff said on Friday that its total revenue from continuing operations rose 4% to 4.497 billion euros ($5.37 billion) in the period, from 4.342 billion euros. “Individual businesses, such as Pepkor Africa and Pepco Group, with their everyday value focus, continued to perform robustly,” Steinhoff said in a statement. “Others, such as Mattress Firm and Greenlit Brands Group reported strong trade as restrictions moderated and the operations focused strategically on consumers investing in their homes,” the company added. Steinhoff owns furniture, electronics, homeware and clothing brands under majority-owned Pepkor in Africa, Pepco in Europe, Greenlit Brands in Australia and New Zealand, LIPO in Switzerland and a 50% stake in Mattress Firm in the U.S. It said earnings before interest, taxes, depreciation and amortization (EBITDA) – a measure of operating profit – from continuing operations rose to 686 million euros, from a restated 639 million euros in the comparable prior period. The loss from continuing operations dropped to 319 million euros from 1.3 billion euros. Total group debt increased to 10.4 billion euros from 9.9 billion euros as the interest accrued exceeded debt repaid, Dutch-registered Steinhoff said. Its Johannesburg-listed shares were up 2.53% at 0814 GMT, valuing Steinhoff at around 8.4 billion rand ($594 million), while its Frankfurt-listed shares rose 2.63%. Steinhoff was valued at more than 230 billion rand before it was rocked by an accounting fraud in December 2017. ($1 = 0.8370 euros) ($1 = 14.1429 rand)