Fed's Rate Path Clouds Currency Outlook

9 Sep 2024 , 10:25 AM

The dollar remained in tight ranges on Monday, while the yen reduced its safe-haven gains, as investors remained uncertain about the size of a Federal Reserve rate decrease expected later this month and looked to this week’s US inflation figure for fresh clues.

Consumer prices in China rose to their highest level in half a year in August, but producer price deflation intensified, with the yuan under pressure in the Asian session.

The onshore yuan was last down 0.27% at 7.1088 per dollar, while the offshore counterpart fell 0.2% to 7.1092.

Currencies around the world fought for direction after Friday’s highly anticipated U.S. jobs data failed to provide traders with clarity on whether the Fed would deliver a usual 25-basis-point rate decrease or a massive 50-basis-point cut at its policy meeting next week.

While employment expanded less than predicted in August, the unemployment rate fell and pay growth remained strong, indicating that the US labour market was cooling, but not at a rate that would cause concern about the economy’s growth future.

The yen gave up some of its gains after rising 2.73% last week as risk aversion gripped markets and volatility followed the nonfarm payrolls report.

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