© Reuters. FILE PHOTO: U.S. Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
By Ankur Banerjee and Kevin Buckland
SINGAPORE (Reuters) – The U.S. dollar hovered near the middle of recent ranges versus major peers on Thursday as investors digested comments from a slew of Federal Reserve officials, while crucial consumer inflation data loomed next week.
Meanwhile, the risk-sensitive Australian dollar rallied against a backdrop of gains for U.S. equity futures and a more hawkish Reserve Bank. The New Zealand dollar also advanced.
Moving to a federal funds rate of between 5.00% and 5.25% “seems a very reasonable view of what we’ll need to do this year in order to get the supply and demand imbalances down,” New York Fed President John Williams said at a Wall Street Journal event.
Williams’s comments followed Chair Jerome Powell’s sticking by his interest rate outlook on Tuesday, when he reiterated that a process of “disinflation” was underway.
{{2126|The do, which measures the U.S. currency against six rivals, slipped 0.13% to 103.32, pulling away from the one-month high of 103.96 it touched on Tuesday at the peak of a rally following Friday’s stronger-than-expected jobs report. At the same time, 103 has provided a firm floor all week.
The employment data initially raised expectations that the Fed might go back to an aggressive monetary policy stance, but Powell did not lean that way in his speech.
Investors will closely watch consumer price inflation data on Tuesday for additional clues on the policy outlook.
OCBC currency strategist Christopher Wong said the pace of rebound in the dollar was showing tentative signs of moderation but the currency was still somewhat supported by Fed suggestions that rate hikes will continue.
“On one hand Powell’s comments at the Economic Club of Washington the night before were less hawkish but on the other hand, Fed officials such as Williams (and Fed Governor) Lisa Cook took the opportunity to turn up the hawkish rhetoric,” said Wong.
Market pricing anticipates the Fed funds rate peaking just above 5.1% by July then falling by the end of the year to 4.8%.
The euro rose 0.18% to $1.07325, pulling away from the one-month low of $1.067 it touched on Tuesday, as it continued to find support from Wednesday’s hawkish comments from two German officials at the European Central Bank (ECB).
“From where I stand today we need further, significant rate hikes,” German central bank chief Joachim Nagel told the newspaper Boersen-Zeitung on Tuesday.
His colleague Isabel Schnabel said it is not yet clear that the ECB rate hikes so far would bring inflation back to 2%.
The Japanese yen was flat at 131.455 per dollar, while sterling was last trading up 0.1% at $1.2087.
The Australian dollar rose 0.49% to $0.6958, while the was up 0.66% at $0.63485.
