Dollar Weakens, Kiwi Slips on Rate Cut

14 Aug 2024 , 11:04 AM

The dollar sags amid benign US inflation data; kiwi skids on rate cuts.

The dollar stayed on the back foot on Wednesday, after falling against key rivals overnight, as a benign reading for US producer prices bolstered betting on Federal Reserve rate cuts this year.

The New Zealand dollar fell significantly from a four-week high after the Reserve Bank of New Zealand slashed the benchmark cash rate and signalled more cuts to come, surprise some market participants.

The yen rose against the dollar, aided by lower US bond yields, with key US consumer price index statistics due later on Wednesday.

Japanese Prime Minister Fumio Kishida’s decision not to seek for reelection in his party’s leadership battle next month had little impact on markets, according to analysts.

Meanwhile, risk-sensitive currencies such as sterling and the Australian dollar held firm as the surprise slowing of US inflation boosted equities. The Australian dollar briefly touched a three-week high, while sterling traded around a two-week high after posting its best one-day performance against the dollar since late April.

The dollar index, which measures the currency against six main rivals including sterling, the euro, and the yen, was unchanged at 102.61 as of 0315 GMT, after falling 0.49% overnight.

Traders were already confident that the Federal Open Market Committee (FOMC) will drop interest rates at its September meeting before the producer pricing data, but they increased their bets for a massive 50 basis point cut to 53.5% from 50% the day before, according to CME’s FedWatch Tool.

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