The dollar held near recent highs on Thursday, supported by the idea that the Federal Reserve will continue to tighten policy aggressively, while the Swiss franc hits its strongest against the euro since the Swiss National Bank removed its floor under the currency in 2015.
The franc gained 0.5% against the euro to reach 0.9529 francs, its highest level against the single currency since January 15, 2015, the day the SNB abolished its minimum exchange rate of 1.20 frank for one euro. The franc also strengthened by 0.7% against the dollar to 0.95645 francs.
“The Swiss currency is currently the only safe haven in the G10 and I think that is attracting investors because next week with the FOMC it could be another choppy week for equity markets if the (Fed) goes up 75 or even points,” said Kenneth Broux, senior strategist at Societe Generale. The Swiss National Bank is also meeting next week and Broux notes speculation that they could join the Fed and the ECB with outsized rate hikes.
Money markets are fully pricing in a 75 basis point rate hike against the SNB, with just under a 50% chance of a full 1 percentage point hike, according to data from Refinitiv. The euro was little changed at $0.9982, not too far off its 20-year low of $0.9864 hit last week, while the pound was 0.4% lower at $1.1492 .
The dollar was up 0.3% against the yen at 143.55, after falling 1% on Wednesday following news that the Bank of Japan had checked exchange rates with banks – a possible preparation for the purchase of yen. That left the dollar index firm at 109.71, holding onto its 1.5% gain from Tuesday, when US inflation data turned warmer than expected. That caused markets to reposition for a Fed seemingly left with no choice but to opt for another big hike at its rate-setting meeting next week.
Fed funds futures now price around a 30% chance that the Fed will raise rates by 100 basis points, with a rise of at least 75 basis points fully expected by the market. Traders will be watching US retail sales and industrial production data later today because, as ING analysts note, the data is the most likely thing to trigger a dovish price revision. .
The Fed, in recent months, has not wanted to push back the market’s hawkish expectations. Nevertheless, ING concludes: “We see a good chance that today’s data will not trigger any significant downward price revisions in Fed rate expectations, and the hawkish inertia of next week’s meeting means the dollar can remain supported.”
Investors continued to wonder if the Japanese authorities would really intervene to support their battered currency, which has fallen nearly 20% this year. But some market watchers have expressed skepticism of direct intervention or lasting impact. Satsuki Katayama, head of a ruling party panel on financial affairs in Japan, told Reuters the country lacked effective means to combat the sharp decline in the yen.
A record Japanese trade deficit for August also underscored the yen’s bearish case. The overseas-traded Chinese yuan slipped to seven to the dollar in European time on Thursday, the first time since July 2020, as markets continue to test Chinese officials’ willingness to defend the token level.
In the crypto markets, Ether did not move significantly after Vitalik Buterin, inventor and co-founder of Ethereum, wrote on Twitter that a major software upgrade to the Ethereum blockchain aimed at reduce its energy consumption has been completed. The token, which underpins the Ethereum network, was down 3%. Bitcoin was a bit softer at just under $20,150.
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)