As dovish Fed remarks lower rate expectations, the dollar declines in early trade

10 Oct 2023 , 10:12 AM

On Tuesday, investors saw a minor dovish shift in the Federal Reserve members’ tone, which contributed to a decline in Treasury rates, an easing of dollar expectations, and a drop in U.S. interest rate expectations.

The Middle East conflict encouraged the purchase of safe-haven assets, and the yen held modest gains as a result. It last traded firmly at 148.34 per dollar. Additionally strengthening, the Swiss franc was creeping higher against the dollar at 0.9045.

Early Asian trading saw the euro rise 0.1% to $1.0580. After the central bank committed to sell $30 billion worth of foreign currency, the Israeli shekel held steady at 3.95 to the dollar, slightly above an almost eight-year low.

Investors are preparing for a protracted confrontation following a weekend attack by Palestinian militants, which Israel responded to by killing more than 1,500 people.

However, remarks by two Fed officials, who noted that the current selloff in bonds would make additional raises unnecessary, flipped around the mood and U.S. rate estimates overnight.

Given the recent increase in rates, Fed Vice Chair Philip Jefferson said the institution would need to ‘proceed carefully.’ The expected futures price for the likelihood of a further Fed rate increase this year dropped from over 40% last week to approximately 26% on Monday.

After the cash market closed on Monday for Columbus Day, ten-year Treasury yields, which had been skyrocketing, fell more than 13 basis points to 4.63% at the opening in Tokyo on Tuesday due to both rates relief and a safe-haven bet. [US/]

Sterling’s exchange rate to the dollar was somewhat firmer at $1.2244. The US dollar was little weaker against the Australian and New Zealand currencies, with the Australian up 0.2% to $0.6420 and the kiwi up 0.2% to $0.6031.

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