The dollar had already scored its biggest quarterly gain since June 2018, and encouraging economic data from the US have led markets to scale back expectations the Federal Reserve will cut interest rates in coming months. — Reuters pic
LONDON, Oct 1 — The dollar rose to a 29-month high today as renewed evidence of strength in the US economy encouraged investors to buy dollars, especially versus the euro.
The dollar had already scored its biggest quarterly gain since June 2018, and encouraging economic data from the US have led markets to scale back expectations the Federal Reserve will cut interest rates in coming months.
Germany’s September CPI data, by contrast, rose less than expected, suggesting euro zone inflation was losing momentum and the region’s economy was not improving, despite a large dose of stimulus from the European Central Bank last month.
“The economic divergence trade between Europe and the US has become even stronger, and unless there is a clear sign of a slowdown in the US economy, the dollar is expected to stay on a strong footing,” said Commerzbank analyst Thu Lan Nguyen.
Data due today are forecast to show consumer prices in the euro zone rose an annual 1.0 per cent in September, unchanged from the previous month and below the ECB’s target.
Against a basket of other currencies, the dollar rose 0.2 per cent to 99.58, its highest since May 2017.
Economic surprise indexes published by Citigroup for the United States and Europe showed an increased divergence. The former is at its highest in nearly two years; the latter has fallen to a 2019 low.
Elsewhere, the Australian dollar was the main underperformer in the G10m after the Reserve Bank of Australia cut interest rates and expressed concern about job growth.
The Australian dollar fell 0.7 per cent to US$0.6700 (RM2.81) after the RBA cut its cash rate to a record low of 0.75 per cent, as expected.
The New Zealand dollar fell to a four-year low of US$0.6238, as weakening business confidence bolstered expectations for monetary easing. — Reuters