Euro hits 10 month-high on dollar, as central banks chart divergent courses

SINGAPORE/LONDON - The euro sat at a 10-month high against the dollar on Thursday, ahead of a European Central Bank meeting at which markets expect a half-percentage point rate increase, a day after the U.S. Federal Reserve slowed the pace of its rises to 25 basis points. The Fed also said it had turned a corner in the fight against inflation, its first explicit acknowledgment that price increases are slowing, underpinning market expectations that the end of the central bank's rate-rise campaign is near and cuts could follow. The dollar's most dramatic overnight dive came after Fed Chair Jerome Powell told a post meeting news conference that "the disinflationary process has started", although he also signalled that interest rates would continue rising and that cuts were not in the offing. "It was very much a sort of relief ... that there was nothing there to really seriously challenge the market's prevailing view," said Ray Attrill, head of FX strategy at National Australia Bank (NAB). "(Powell) said that rates are going to have to be restrictive for some time, but that doesn't dissuade the market from saying some time might be six months, rather than two years." The Bank of England also meets on Thursday, with its rate decision due at 1200 GMT before the ECB's at 1315 GMT. Markets also expect a half-point increase from the British central bank. Sterling, which rose 0.47% on Wednesday, held at $1.236, and the dollar slid against the Japanese yen, dropping to as low as 128.07, its lowest in two weeks. The euro hit $1.1034 in Asian trading on Thursday, its highest since April 4, having jumped 1.2% on Wednesday. It was last at $1.100, broadly flat on the day, as the focus turned to the ECB meeting. "A 50bp hike is widely expected as is a hawkish message that will support market pricing of a further 75-100bp of tightening into the summer," said Chris Turner global head of markets at ING in a note. "A sharp narrowing in rate differentials stands to become a bigger driver of EUR/USD this year and should carry it to the $1.15 area in the second quarter. Turner said the derivatives market shows the smallest premium in dollar rates over euro equivalents since late 2021. Also among the sharper Wednesday movers were the Australian dollar, which gained 1.2% on the day and hit a new eight-month high of $0.7158 in early Asia trade Thursday, and the Swiss franc which firmed to its strongest since late 2021 on Thursday. Against a basket of currencies, the U.S. dollar index fell over 1% to a fresh nine-month low of 100.80 on Wednesday, and traded just above that on Thursday. Friday's U.S. nonfarm payrolls report will be the next test of the Fed's fight against inflation, though official statistics on Wednesday showed that job openings had unexpectedly risen in December, pointing to a still-tight labour market. (Reporting by Rae Wee in Singapore and Alun John in London; Editing by Bradley Perrett, Robert Birsel)

Euro hits 10 month-high on dollar, as central banks chart divergent courses

DISCOVER MORE

India's forex reserves rise to over six-week high

Pakistan forex reserves up $280mln to $4.6bln on March 17

South African rand flat as markets weigh Fed's rate stance

Russian rouble eases vs dollar after strong gains

Dollar's smile looks a little lopsided: Mike Dolan

Dollar steady after Fed's rate pause hints, yen rises

Sterling rises to seven-week highs ahead of BoE meeting

Indian rupee jumps against UAE dirham in early trade

UAE exchange firm Al Ansari upsizes IPO on strong investor demand

Dubai's Emirates expands training fleet with $4.3mln aircraft order

2 African development banks invest $16bln in oil, gas projects

GCC central banks track US Fed move; hike key rates by 25bps

UAE's Presight AI to debut on Abu Dhabi Securities Exchange next week

Dollar eases as investors ponder outlook for Fed rates

Sterling rises as inflation data turns heat up on BoE

Lebanon to sell unlimited US dollars to prop up collapsing pound

Lebanon announces 'open' selling of U.S. dollars at rate of 90,000 pounds per dollar

SNB sold $24bln in foreign currencies during 2022 in intervention U-turn

LATEST VIDEO

VIDEO: LSE-listing will facilitate more funding opportunities for us, Dar Global CEO

ZAWYA COVERAGE

Will gold face more downside or upside after Fed's rate hike?

Kenya signs $250mln deal with UK to boost food production

PODCAST: IFC is ready to back governments privatisation plans with capital

UAE's Presight AI to debut on Abu Dhabi Securities Exchange next week

UAE jobs: Fines, imprisonment for revealing employer's secrets

Ramadan in UAE: Getting headaches while fasting? Experts share tips to avoid

UAE weather: Temperatures to rise today, cloudy skies tonight

Guinea-Bissau upset Nigeria, Morocco reach finals in Nations Cup qualifying

Intel co-founder Gordon Moore, prophet of the rise of the PC, dies at 94

THE BRI REPORT

China is reshaping the Belt and Road Initiative ahead of a post-pandemic era

DISCOVER MORE

LATEST VIDEO

ZAWYA NEWSLETTERS

ZAWYA COVERAGE