By Rae Wee
SINGAPORE, Feb 8 (Reuters) - The dollar eased on
Wednesday after Federal Reserve Chair Jerome Powell showed
little sign of a hawkish pushback against a resilient labour
market in the United States, raising hopes that interest rates
may not rise much further.
In a question-and-answer session before the Economic Club of
Washington on Tuesday, Powell acknowledged that interest rates
might need to move higher than expected if economic conditions
remained strong but reiterated that he felt a process of
disinflation was underway.
The U.S. dollar struggled to recover its losses in Asia
trade on Wednesday, after slipping in the previous session as
Powell spoke.
Sterling rose 0.02% to $1.20525, rebounding from
Tuesday's one-month trough of $1.19615.
Similarly, the euro was last marginally higher at
$1.0730, after falling to $1.06695 in the previous session, its
lowest since Jan. 9.
Powell "didn't necessarily say something that was tangibly
new... I think we're becoming quite accustomed to the idea that
the Fed now is certainly data dependent," said Chris Weston,
head of research at Pepperstone.
"The markets and the central bank are all in a position now
where they're just watching the data, so for now we're less
sensitive to Fed officials and far more sensitive to data."
Against a basket of currencies, the U.S. dollar index steadied at 103.31, after slipping 0.3% in the previous session.
The greenback had a short-lived rally following Friday's
blockbuster jobs report, which showed that nonfarm payrolls had
surged by 517,000 jobs last month.
That sent the U.S. dollar index to a one-month high of
103.96 on Tuesday, as investors raised their expectations of how
much further the Fed would need to keep raising interest rates.
Futures pricing showed that markets are expecting the Fed funds
rate to peak just above 5.1% by June. Elsewhere, the yen last bought at 131.21 per
dollar, after surging 1.2% in the previous session.
Japanese real wages rose for the first time in nine months
thanks to robust temporary bonuses, data on Tuesday showed,
offering a glimmer of hope to investors, who are closely
following wage trends in the country.
A substantial pay growth in spring labour talks is seen as
an essential condition for the Bank of Japan (BOJ) to scale back
its massive monetary stimulus.
Separately, Japanese Prime Minister Fumio Kishida said on
Wednesday that the new BOJ governor must have strong
communication skills and the ability to closely coordinate with
global central banks.
The kiwi slipped 0.02% to $0.6324, while the Aussie advanced 0.06% to $0.6964, after surging more than 1%
on Tuesday.
The Reserve Bank of Australia on Tuesday raised its cash
rate by 25 basis points, as expected, but reiterated that
further increases would be needed, indicating a more hawkish
policy tilt than many had expected.
"Most market participants were kind of caught off guard by
the hawkish tilt," said Carol Kong, a currency strategist at
Commonwealth Bank of Australia. She now expects two more 25
basis-point rises in March and April, taking the cash rate to a
peak of 3.85%.
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(Reporting by Rae Wee; Editing by Bradley Perrett and
Christopher Cushing)
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