FOREX-Dollar Gains as US Stocks Fall; fall of the euro and the pound sterling


By Caroline Valetkevitch

NEW YORK, October 5 (Reuters)The dollar rebounded across the board on Wednesday as recent risk sentiment reversed and US equities fell, with the euro and sterling down more than 1% each.

euro EUR=EBS was down 1.4% at $0.9852 after rising 1.7% on Tuesday.

Sterling GBP=D3 fell 1.8% to $1.1268, after rising for six consecutive sessions. His fall was slightly prolonged as British Prime Minister Liz Truss promised to reduce debt as a share of national income, just over a week after government plans to cut taxes and increase borrowing spooked markets.

Adding to the pressure on the pound, data showed that Britain’s private sector economy last month suffered the biggest contraction in activity since the COVID-19 lockdown early last year.

Recent gains in most major currencies against the dollar have been underpinned by hopes from investors and traders that the US Federal Reserve will raise interest rates less than expected.

“You had general risk where the euro, the pound were trading really well and the stock market was gaining. I kind of think it’s just (investors) exploring a trading range,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“Ultimately, the rebound in risk assets is not happening because of a change in Fed sentiment.”

From there, investors will likely focus on Friday’s U.S. jobs data, he said, which will be watched for clues about the possible path of Fed monetary policy.

US Fed Governor Philip Jefferson reiterated overnight that inflation was the main target of policymakers and that growth would suffer from efforts to reduce it.

San Francisco Fed President Mary Daly took a softer line and said the impact of the dollar, which is soaring this year, on other currencies and economies was concerning.

A fifth consecutive year of 50 basis points rate hike of the Reserve Bank of New Zealand (RBNZ) reminded investors on Wednesday that inflation remains the main concern of central banks.

The New Zealand dollar USD=D3 was last down 1% at $0.5676, after surging 1.3% earlier in the session. The Australian dollar AUD=D3 was also 1% lower at $0.6436.

In other currencies, the dollar appreciated by 0.4% against the Japanese yen JPY=EBS.

Global exchange rates

(Additional reporting by Harry Robertson in London. Additional reporting by Tom Westbrook in Sydney; Editing by Bernadette Baum and Jonathan Oatis)

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