By Ankur Banerjee and Alun John
SINGAPORE/LONDON, March 7 (Reuters) - The U.S. dollar
climbed on Tuesday ahead of testimony before Congress by Federal
Reserve Chair Jerome Powell, and gaining most dramatically
against the Aussie after the Reserve Bank of Australia hinted
the end is near to its monetary tightening.
The U.S. dollar index , which measures the unit
against six major rivals, was up 0.25% at 104.52, having slipped
0.26% a day earlier.
Its gains were broad based with the euro down 0.22%
to $1.0655, sterling down 0.32% at $1.19885 and the
dollar up 0.1% against the Japanese yen to 136.05.
The day's main event for the dollar is due later on Tuesday
when Fed Chair Powell begins two days of testimony before
Congress, though the week's key development will be February's
non-farm payrolls report due on Friday.
"Today's semi-annual testimony will be important in
determining whether the U.S. dollar can regain upward momentum
in the week ahead," said Lee Hardman, senior currency analyst at
MUFG.
"Market participants will be looking for clear signals from
Powell that he is considering adjusting his plans for only a
couple more hikes this year, and displays some concern over
recent stronger U.S. activity and inflation."
"If (he) remains cautious ... that could trigger the dollar
index to fall further below the 105.00-level ahead of the
release of the NFP report on Friday."
After delivering significant rises last year, the Fed raised
interest rates by 25 basis points at its last meeting, but
resilient economic data throughout February stoked fears of the
central bank going back to bigger steps.
Fed funds futures pricing indicates a 78% probability the
U.S. central bank will raise rates by 25 bps at its March
meeting, with a 22% chance of a 50-bps hike. They also expect
interest rates to peak at 5.47% in September and still be above
5% at the end of the year. The Australian dollar was the day's major G10
mover, sliding 1% to $0.6660, its lowest since late December
even as the central bank raised its cash rate as expected by 25
bps to 3.60%, the highest in more than a decade.
But in a dovish move, the Reserve Bank of Australia (RBA)
changed its language about further rate increases suggesting the
central bank might be nearing the end of its cycle of increases.
"An initial glance at RBA's statement suggests they are
nearing the end of the tightening cycle, and perhaps one step
closer to publicly discussing a pause," said Matt Simpson,
senior market analyst at City Index.
Investors are also awaiting the final policy meeting for
Bank of Japan Governor Haruhiko Kuroda on Thursday and Friday,
when the central bank is set to stick to its ultra-loose
monetary path.
Data on Tuesday showed Japan's real wages fell the most in
nearly nine years in January as four-decade-high inflation
squeezed the purchasing power of consumers.
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(Reporting by Ankur Banerjee and Rae Wee in Singapore and Alun
John in London; Editing by Shri Navaratnam, Bernadette Baum and
Shounak Dasgupta)
Twitter: @AnkurBanerjee17))
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