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Australian dollar falls as RBA surprises with lower hike; Sterling stands tall by Reuters

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© Reuters. FILE PHOTO: Pound sterling and US dollar banknotes seen in this illustration taken January 6, 2020. REUTERS/Dado Rovich/Illustration/file photo

Written by Kevin Buckland

TOKYO (Reuters) – The Australian dollar fell on Tuesday after the country’s central bank surprised markets with a lower-than-expected interest rate hike, while sterling continued to recover a day after the British government changed its controversial tax cuts.

It fell 0.97% and was last traded 0.5% weaker at $0.6482.

The Reserve Bank of Australia said it decided to slow the pace of tightening because the liquidity ratio had risen significantly in a short period of time, although policy makers left the door open for additional increases.

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“Obviously the RBA has not been convinced by what other central banks are doing, which shows they don’t have any concerns about exchange rate depreciation here,” said Ray Atrell, head of FX strategy at National Australia Bank. (Out of the cabin 🙂 in Sydney.

“There is no evidence yet that other central banks are about to let up on the aggressiveness with which they are tightening their policy, (so) I think it makes sense for the Australian dollar to be below 65 at the moment.”

Heading into the RBA’s decision, the risk-sensitive currency has been tracking just below the upper end of its range since September 23 at $0.6537. It fell to a two-and-a-half year low of $0.63635 last week, weighed by fears of a global recession.

Sterling rose 0.08% to $1.1333 after earlier hitting $1.13435, its highest level since Sept. 22, a day before the new government roiled markets with its mini-budget for massive tax cuts funded by expanded borrowing.

British Prime Minister Liz Truss was forced to renege on the plan on Monday amid a partisan rebellion.

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The euro also hovered near its highest level since Sept. 22, and was last stronger by 0.15% at $0.9838.

The US dollar lost some support from a slide in Treasury yields overnight after domestic economic data showed a slowdown in manufacturing, indicating that aggressive Fed rate hikes had already begun. [US/]

It – which measures the currency against six peers including the pound and the euro – was flat at 111.55, not far from Monday’s low of 111.46, a level last seen on September 23. It rose to a two-decade high of 114.78 last Wednesday.

On Monday, an Institute for Supply Management (ISM) survey showed that US manufacturing activity was the slowest in nearly two-and-a-half years in September as new orders contracted, with a gauge of factory-gate inflation slowing for the sixth month in a row.

However, the Commonwealth Bank of Australia (OTC:) anticipates that the sterling’s respite will not last long and the dollar’s rally should continue further.

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Over the next month, “the dollar could remain elevated as the FOMC continues to rally strongly and () the global economy enters a recession,” CBA strategist Joseph Caporso wrote in a client note.

He also noted that “the risks of a global recession could push the pound significantly lower” and that “the weak economic outlook in the UK will keep the pound under pressure” in the medium term.

The dollar was 0.14% stronger at 144.77 yen, to stay below 145 after briefly rising above that level on Monday for the first time since the Japanese authorities intervened to support its currency on Sept. 22.

Japanese Finance Minister Shunichi Suzuki reiterated on Monday that authorities are ready to take “decisive” steps in the foreign exchange market if the yen’s “sharp and one-sided” moves continue.

The New Zealand dollar slipped 0.34% to $0.56995, although that was still close to the top of its range since September 26. The Reserve Bank of New Zealand decides policy on Wednesday, and the entire market is priced at half a point, while giving 29% odds on a 75 basis point increase.

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Dollar falls as easing of restrictions in China boosts risk sentiment By Reuters

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© Reuters. FILE PHOTO: One hundred US dollar banknotes are seen in this illustration taken in Seoul on February 7, 2011. REUTERS/Lee Jae-won/File Photo

SINGAPORE (Reuters) – The dollar fell broadly on Monday after a rough week, weakening below 7 yuan as sentiment towards riskier non-dollar assets improved after signs of China easing some coronavirus-related restrictions.

More Chinese cities, including financial hub Shanghai and Urumqi in the far west, announced easing coronavirus restrictions over the weekend as China tries to soften its stance on COVID-19 restrictions in the wake of unprecedented protests against the policy.

“They may seem like small steps, but nonetheless they are a strong sign that China is taking measured steps toward reopening,” said Christopher Wong, currency analyst at OCBC.

China is preparing to announce soon easing nationwide testing requirements, as well as allowing positive cases and close contacts to isolate at home under certain conditions, people familiar with the matter told Reuters last week.

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The dollar fell below 7.0 yuan in foreign trade, while it jumped about 1.4% to 6.9507 on Monday morning, the strongest level since Sept. 13.

The euro, which measures the currency against six major peers including the yen and the euro, fell 0.18% to 104.28, its lowest since June 28.

The index fell 1.4% last week, capping a 5% decline for November, its worst month since 2010, on mounting expectations that the Federal Reserve is ready to scale back interest rate hikes after four consecutive 75-bps. Points increase.

Investors’ focus will be on US consumer price inflation data due on December 13, a day before the Federal Reserve wraps up its two-day policy meeting.

The US central bank is expected to raise interest rates by an additional 50 basis points at the meeting. Fed fund futures traders are now pricing the Fed’s benchmark rate to a peak of 4.92% in May.

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OCBC’s Wong said some degree of caution is still warranted because the Fed is not done tightening. “They’re still tightening up, it’s just that it’s going to be in baby steps.”

Traders appeared to be looking beyond the stronger-than-expected US jobs report for November on Friday after some Federal Reserve speakers calmed market concerns.

“We’ve blown past the US payrolls with a temporary jolt to risk markets,” said Chris Weston, head of research at Pepperstone, noting that the data supports the “soft landing” argument and is unlikely to change the Fed’s course.

Meanwhile, the Japanese yen was down 0.04% against the dollar at 134.37 per dollar, after rising 3.5% last week, off October’s low of 151.94.

The euro rose 0.38% to $1.0578, after rising 1.3% last week. It had earlier touched its highest level in more than five months at $1.05835.

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The pound rose to $1.23450, the highest level since June 17, and was last trading at $1.2339, up 0.42%.

The Australian dollar rose 0.75% to $0.684, while it rose 0.31% to $0.643.

================================================== == ======

The currency bid prices are at 0520 GMT

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

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previous change

session

EUR/USD 1.0580 $1.0541 +0.37% -6.94% +1.0584 +1.0512

USD/JPY 134.3800 134.2950 +0.00% +16.75% +134.7600 +134.2800

EUR/JPY 142.18 141.53 +0.46% +9.10% +142.2200 +141.5700

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USD/CHF 0.9349 0.9368 -0.19% +2.51% +0.9393 +0.9344

GBP/USD 1.2337 1.2293 +0.37% -8.76% +1.2343 +1.2251

USD/CAD 1.3401 1.3474 -0.54% +5.99% +1.3473 +1.3386

AUD/USD 0.6841 0.6794 +0.63% -5.94% +0.6851 +0.6764

NZ 0.6429 0.6413 +0.27% -6.06% +0.6442 +0.6367

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Tokyo forex market information from Bank of Japan

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The Dow shines as tech stocks squeeze higher on the Nasdaq

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The Dow Jones Industrial Average is outperforming the broader S&P 500 to an extent not seen in nearly a century.

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Saudi Crown Prince invests in Credit Suisse unit, Wall Street Journal reports

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(Bloomberg) — Saudi Crown Prince Mohammed bin Salman is preparing to invest in the investment bank of Credit Suisse Group AG, The Wall Street Journal reported.

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The newspaper said, citing people familiar with the matter, that Prince Mohammed may invest about $500 million in the lender’s CS First Boston. Other investors could include former Barclays plc CEO Bob Diamond Atlas Merchant Capital, according to the report.

Credit Suisse Chairman Axel Lehmann said last week that the bank had received several additional commitments from investors regarding First Boston’s investment bank plan.

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Prince Mohammed is encouraging Saudi Arabia’s largest companies to expand globally, raising the country’s image as a serious investor and diversifying its economy. The kingdom is already backing Credit Suisse, with the National Bank of Saudi Arabia taking a 9.9% stake in the troubled Swiss bank.

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