The Australian dollar eased to a more than two-month low of $0.6690 and was last down 0.45% at $0.6702 as the central bank raised its cash rate as expected by 25 basis points to the highest in more than a decade at 3.60%. But in a dovish move, the RBA changed a reference to further rate "increases", saying instead that "further tightening" would be needed, suggesting that 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.
Elsewhere, the U.S. dollar index , which measures it against six major rivals, was flat at 104.24, having slipped 0.26% overnight. The index is down 0.6% for the month following a 2.6% gain in February. The euro was up 0.03% to $1.0681, holding its nearly 0.5% rise overnight. Sterling was last trading at $1.2037, up 0.13% on the day, while the kiwi rose 0.08% to $0.620. The Japanese yen was mostly flat at 135.93 per dollar ahead of 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.
Investor attention will firmly be on Powell's testimony before Congress on Tuesday and Wednesday, with the February jobs report due on Friday also keenly awaited.
Kevin Cummins, chief economist at NatWest Markets, said Powell would likely express heightened concern about inflation but would probably stop short of raising expectations for a 50 basis point rate increase on March 22. After delivering significant rises last year, the Fed raised interest rates by 25 basis points at its past two meetings, but resilient economic data throughout February stoked fears of the central bank going back to bigger steps. "We suspect he will sound noncommittal for now and take his cues from the looming upcoming key data," said Cummins, who expects the Fed to raise rates by 50 basis points.
Fed funds futures traders are pricing in a 76% probability
the Fed will raise rates by 25 basis points at its March
meeting. They also expect interest rates to peak at 5.48% in
September and still be above 5% at the end of the year. OCBC currency strategist Christopher Wong said Powell's
testimony will be one of the last instances of Fed officials
speaking before the black-out period commences ahead of the FOMC
meeting.
"We will be looking for clues on how extended this hiking
cycle may be, how high terminal rates may go and whether the
magnitude of hike will increase," Wong said, adding he expects
the dollar to be volatile between now and the next Fed meeting.
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Currency bid prices at 0627 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar $1.0682 $1.0684 -0.01% -0.31% +1.0693 +1.0676
Dollar/Yen 135.8950 136.0800 -0.11% +3.58% +136.1650 +135.9000
Euro/Yen <EURJPY=EB 145.16 145.17 -0.01% +3.47% +145.4400 +145.1600
S>
Dollar/Swiss 0.9299 0.9308 -0.08% +0.58% +0.9314 +0.9297
Sterling/Dollar 1.2037 1.2027 +0.10% -0.45% +1.2048 +1.2017
Dollar/Canadian 1.3617 1.3612 +0.03% +0.49% +1.3618 +1.3600
Aussie/Dollar 0.6702 0.6732 -0.44% -1.67% +0.6748 +0.6690
NZ 0.6201 0.6197 +0.04% -2.36% +0.6214 +0.6190
Dollar/Dollar
All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Ankur Banerjee and Rae Wee in Singapore; Editing by Robert Birsel & Shri Navaratnam)
Twitter: @AnkurBanerjee17;))