Dollar slips from 18-month high as Treasuries rally
Traders put the chance of unchanged Fed rates in October at 73%, as officials signaled they could wait for greater clarity despite strong inflation data.
Dollar falls from 18-month high as October rate-hike expectations fade
Traders priced a 72% chance of unchanged Fed rates, while the euro and sterling advanced despite stronger-than-expected U.S. inflation and spending figures.
The dollar weakened on October 15, with its index losing 0.44% to 102.00 after reaching an 18-month high the preceding day. Cautious Federal Reserve commentary reduced expectations for an October rate increase, while concerns about debt at AI companies helped draw investors into government bonds.
The retreat came despite September producer prices posting their biggest rise in 4-1/2 years. Increases across goods and services suggested inflation was extending beyond energy. Retail sales also beat expectations, aided by more expensive gasoline, and weekly claims for unemployment benefits increased slightly.
CME Group's FedWatch Tool showed traders assigning a 72% probability to rates staying unchanged at the October 27-28 meeting, versus 53% a month earlier. Expectations for an increase had strengthened after the consumer inflation report before easing as Fed officials spoke.
Michelle Bowman, the Fed's vice chair for supervision, and Mary Daly, president of the San Francisco Fed, said policymakers could seek more clarity before the meeting. Uto Shinohara, senior investment strategist at Mesirow Currency Management, said chip-stock declines were helping bonds and limiting yields despite inflation signals.
Among other currencies, the euro climbed 0.48% to $1.1210 after touching an 18-month low. Sterling rose 0.45% to $1.3251 following an unexpected 0.1% expansion in Britain's economy in August.
An unexpected September employment decline in Australia accompanied a 0.88% fall in its currency to $0.6911. The yen rose 0.32%, reaching 157.82 per dollar.