SINGAPORE — The dollar stabilised in Asia on Thursday after an unexpected drop in US factory-gate prices bolstered expectations the Federal Reserve will cut rates next week, with traders now awaiting US consumer price data later in the day.
The dollar index nudged up 0.1 percent to 97.83, rising for a third consecutive day after the Producer Price Index for final demand fell 0.1 percent during August, the Labor Department’s Bureau of Labor Statistics said on Wednesday. The decline followed a 0.7 percent jump in July, which was also revised downwards.
“The market has positioned for the Fed to ease in September and potentially ease three times this year,” said Rodrigo Catril, currency strategist at National Australia Bank in Sydney. “The benign outcome from the PPI tells you pricing expectations look about right.”
Markets are trading on expectations that the prospect of the Fed easing is a certainty and the only remaining question is by how much. Traders are pricing in an 8.9 percent chance of a jumbo 50 basis points (bps) rate cut at the central bank’s September 16-17 meeting, while a cut of at least 25 bps is viewed as a done deal, according to the CME Group’s FedWatch tool.
Appointments to the Fed’s rate-setting panel remained in focus, as President Donald Trump’s administration on Wednesday moved to appeal a federal judge’s ruling temporarily blocking Trump from taking the unprecedented step of firing Federal Reserve Governor Lisa Cook. The White House is seeking to remove her before the US central bank’s meeting next week.
Stephen Miran also moved closer to becoming a Federal Reserve governor, furthering Trump’s effort to exert more direct control over interest rate policy. The Senate Banking Committee voted to advance Miran’s nomination, though lawmakers involved said it is far from certain if the process can be completed in time for him to participate in the coming meeting.
