The New Zealand dollar jumped after the Reserve Bank of New Zealand lowered rates as expected but provided a more hawkish outlook on the future policy path. The Australian dollar popped briefly higher after domestic data showed inflation came in above forecasts.
The kiwi advanced 0.75% to $0.5663, while the Aussie traded 0.14% higher at $0.6478, having earlier risen about 0.3% in the wake of the data release.
Elsewhere, data on Tuesday showed U.S. retail sales rose less than expected in September while producer prices were in line with expectations.
U.S. consumer confidence also sagged in November as households worried about jobs and their financial situation.
All of that left traders adding to bets of a Fed cut next month, with markets now pricing in an 84% chance of a 25-basis-point move, according to the CME FedWatch tool, which in turn kept pressure on the dollar. “The overnight data definitely paints a picture of a slowing U.S. economy, and adds to the case for a near-term rate cut by the FOMC,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia. Against a weaker greenback, the euro edged closer to the $1.16 level and last bought $1.1567, helped slightly by signs of progress in a peace plan between Russia and Ukraine.
Ukraine President Volodymyr Zelenskiy said on Tuesday the country was ready to advance a U.S.-backed framework for ending the war with Russia and discuss disputed points with U.S. President Donald Trump in talks he said should include European allies.
Sterling was little changed at $1.3166, ahead of a high-stakes budget announcement by British finance minister Rachel Reeves later in the day. She is likely to announce tens of billions of pounds of tax increases.
Traders have piled into the options market seeking protection against heightened volatility in the pound ahead of Wednesday’s budget outcome.
“Speculative and hedging activity against the GBP has stepped up in the multi-week lead-up to the UK’s Autumn Budget statement,” said Macquarie Group’s global FX and rates strategist, Thierry Wizman, in a note. The currency could see a relief rally, albeit temporarily, if the budget is seen to be “fiscally responsible”, he added.
Against a basket of currencies, the dollar was down 0.03% to 99.82, having lost 0.3% in the previous session, its biggest daily decline in nearly three weeks.
Also dragging down the dollar lower was a report from Bloomberg News that White House economic adviser Kevin Hassett has emerged as the frontrunner to be the next Fed chair.
Hassett, like Trump, has said interest rates should be lower than they are now under the leadership of Fed Chair Jerome Powell. U.S. Treasury Secretary Scott Bessent said on Tuesday there was a good chance Trump would announce his pick before Christmas.
“Hassett is viewed as closely aligned with President Trump’s preference for lower interest rates, and his appointment would likely reinforce the administration’s push for easier policy,” said Rodrigo Catril, senior FX strategist at National Australia Bank.
The slide in the dollar meanwhile gave some reprieve to the battered yen, which fell 0.1% on Wednesday to 156.24 per dollar but was some distance away from last week’s 10-month trough of 157.90.
Traders have been alert to the risk of an intervention from Tokyo to stem the currency’s decline, with the U.S. Thanksgiving holiday on Thursday opening a possible window for authorities to step in.
“The Thanksgiving holiday will mean thinner liquidity, and that could be an opportune time for Japanese authorities to step in, because that will just mean the impact on markets will be bigger,” said CBA’s Kong.
“I think a direct intervention is definitely a risk this week, just based on the comments from Japanese officials.”
