Naomi Tajitsu / Reuters
Tokyo: The dollar was little changed on Wednesday, 10 October, having retreated from a two-week high against the euro hit the previous day as traders reckoned that the US currency’s rise had been a bit overdone.
Investors awaited further clues on whether the US Federal Reserve will cut interest rates later this month, and caution set in ahead of a meeting of Group of Seven finance ministers next week.
Analysts say the euro’s gains are likely to be limited in the near term as some European officials have voiced their displeasure with the single currency’s strength ahead of the G7 meeting scheduled for 19 October.
“The euro may be vulnerable to verbal intervention from European policymakers,” said Tomoko Fujii, head of economics and strategy for Japan at Bank of America in Tokyo.
“But at the same time, we have to pay attention to US economic data and market developments which will determine the dollar’s direction in light of Fed rate cut expectations,” she said, adding that receding expectations for a Fed rate cut this month may offer some near-term support to the dollar.
The euro was steady at $1.4111 having rebounded from Tuesday’s two-week low of around $1.4015 but well off a record high of around $1.4280 hit on 1 October.
Some traders said the US currency would stay on the defensive even after strong US jobs data released late last week scaled back some expectations for a Fed rate cut this month, which had prompted a short-lived climb in the dollar.
Meanwhile, some said that a rally in global stocks that helped to drive the Dow Jones industrial average and the S&P 500 index to record highs on Tuesday, may prompt selling of the low-yielding yen against high-yielding currencies.