Dollar gains as U.S. stocks drop; euro, sterling fall

  • dollar gains
  • Sterling falls after 6 sessions higher
  • The move in New Zealand dampens hopes of a slowdown in global interest rate hikes

NEW YORK, Oct 5 (Reuters) – The dollar rallied across the board on Wednesday as recent risk appetite reversed and US stocks fell, with the euro and sterling each down more than 1%.

The euro fell 1.4% to $0.9852 after rising 1.7% on Tuesday.

Sterling fell 1.8% to $1.1268 after rising for six straight sessions. Its decline was extended slightly as Britain’s Prime Minister Liz Truss pledged to cut debt as a percentage of national income, just over a week after the government’s plans to cut taxes and increase borrowing spooked markets.

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Adding to the pressure on the pound, data showed that the UK private sector last month suffered the sharpest drop in activity since a COVID-19 lockdown earlier last year.

Recent gains by most major currencies against the dollar have been underpinned by investor and trader hopes that the US Federal Reserve will raise interest rates less than previously expected.

“They had a general risk where the euro and sterling traded really well and the stock market went up. I think that’s just (investors) exploring a range,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

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“The bottom line is that the rebound in risky assets is not happening because the Fed’s views have changed.”

From here, investors are likely to focus on Friday’s US jobs data, he said, which will be watched for clues as to the possible direction of Fed monetary policy.

Federal Reserve Governor Philip Jefferson reiterated overnight that inflation is the top priority for policymakers and that efforts to bring it down would hurt growth.

San Francisco Fed Chair Mary Daly took a softer stance, saying the impact of the dollar, which has risen sharply this year, on other currencies and economies is worrying.

A fifth straight rate hike of 50 basis points by the Reserve Bank of New Zealand (RBNZ) on Wednesday reminded investors that inflation remains the focus of central banks.

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The New Zealand dollar was last down 1% at $0.5676 after rising as much as 1.3% at the start of the session. The Australian dollar was also down 1% to $0.6436.

In other currencies, the dollar was up 0.4% against the Japanese yen.

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Additional reporting by Harry Robertson in London. Additional reporting by Tom Westbrook in Sydney; Edited by Bernadette Baum and Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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