Dollar steady before Fed decision, Kiwi catapults

Jemima Kelly, Reuters

Posted at Nov 01 2017 05:36 PM

LONDON - The dollar steadied against a basket of major currencies on Wednesday as investors eyed a policy decision from the U.S. Federal Reserve later in the day, while New Zealand's battered dollar surged on stronger-than-expected jobs data.

Later on Wednesday, the U.S. central bank is expected to leave interest rates unchanged. Investors will be watching for any new indications that the Fed will resume raising rates next month as expected, and the timing of any moves in 2018, but they do not expect the decision to produce a large market reaction.

"Even a hint that policy should be adjusted in 'coming months' may not have much of an impact on the USD rate curve since 23 basis points of a 25-basis-point rate hike (are) already priced for the December 13th meeting," said ING's head of currency strategy, Chris Turner.

The dollar index, which tracks the greenback against a basket of six major rivals, added 0.1 percent to 94.680, though it remained shy of Friday's three-month high of 95.150.

The euro was flat at $1.1642.

Strategists said investors would be eyeing ADP U.S. jobs data later in the day, ahead of Friday's all-important non-farm payrolls report.

They will also have eyes on Washington, where later on Wednesday Republican lawmakers could introduce a bill to cut taxes and the Treasury Department will release its refunding plans.

Investors will also be searching for clues on who might be the next Fed chair. Ahead of a trip to Asia, President Donald Trump is expected to announce his choice for the position on Thursday, with news reports tipping Fed Governor Jerome Powell as likely to be nominated to take over when Janet Yellen's term expires in February.

The New Zealand dollar stole the Asian spotlight, rising 1.2 percent to $0.6931 after data showed the country's jobless rate sinking to a nine-year low of 4.6 percent.

The kiwi had come under pressure in recent weeks on fears of the new Labour-led coalition government's left-leaning policies, including a clampdown on foreign investment and migration.

"The kiwi was oversold on fiscal uncertainty and about what the Labour-led government would be enacting, so the market was short, and prone to squeezes," said Sue Trinh, head of Asia FX strategy at RBC Capital Markets in Hong Kong.

"The reality is that the government is far from the kind of extreme ideology that you see in some places, like in Europe," she said.

Bitcoin, which has more than doubled in price since mid-September alone, hit another all-time high, hitting $6,452 on the European Bitstamp exchange, boosted by bets that it could enter the financial mainstream after CME Group said it would launch bitcoin futures trading. 

(Reporting by Jemima Kelly; Additional reporting by Lisa Twaronite in Tokyo)