Aurelia Butler

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TOKYO (Reuters) – The dollar held on to fresh highs on Tuesday, pushing the yen down closer to an intervention zone, after strong U.S. economic data bolstered the view that the Federal Reserve will keep interest rates higher for longer.The euro also hit over a one-year low against the greenback, dropping below January’s 1.0482 nadir, as manufacturing surveys released in both Europe and the U.S. on Monday highlighted the divergence between the two economies. The dollar index rose around 0.5% to 107.06, at one point hitting as high as 107.12, its highest since November 2022. U.S. manufacturing took a step further towards recovery in September as production picked up and employment rebounded, according to a survey on Monday that also showed prices paid for inputs by factories falling considerably.The dollar also got a boost from rising U.S. Treasury yields as the upbeat economic news underpinned the higher-for-longer Fed rates views, while the last-minute deal that averted a government shutdown reduced demand for U.S. debt.A batch of strong U.S. economic data over recent weeks has strengthened expectations that the Fed will keep rates elevated for a longer period, with several policymakers warning of the risk of more tightening if inflation doesn’t keep slowing as expected.The selloff of U.S. Treasury bonds is the “talking point” of financial markets, said Carol Kong, economist and currency strategist at Commonwealth Bank of Australia (OTC:CMWAY), and a trend that likely will continue as long as U.S. economic data remains strong. “Tonight’s U.S. JOLTS job openings and non-farm payrolls on Friday can be a catalyst to push up U.S. yields and the USD if they surprise to the upside.”The rally in the dollar has put further pressure on the yen, pushing it closer to the psychologically significant 150-level overnight that markets view as a line in the sand for Japanese authorities that could spur intervention as it did last year.”Given the warnings from Japanese officials, we would not be surprised if the BoJ intervenes soon to prop up the JPY,” Kong added. Japan’s key economic ministers warned again on Monday that authorities were watching with a “strong sense of urgency” as the yen slid.The yen was last at 149.80 against the dollar, just off the overnight low of 149.88.The euro fell to as low as $1.0462 in the Asian morning, the lowest since December last year, after a survey of euro zone PMI showed on Monday that demand kept shrinking at a pace rarely surpassed since the data was first collected in 1997.Sterling was last at $1.20790, its lowest since March 16.The Aussie remained mostly flat ahead of a rate decision by the Reserve Bank of Australia later in the day.Australia’s central bank will hold its key interest rate steady at 4.10%, a Reuters poll of economists found, but another hike is seen with a peak cash rate of 4.35% next quarter as inflation remains above target. More

(Reuters) -U.S. Federal Reserve officials say that monetary policy will need to stay restrictive for “some time” to bring inflation back down to the Fed’s 2% target, but their unity around that phrase masks an ongoing debate over another possible rate hike this year. “I remain willing to support raising the federal funds rate at a future meeting if the incoming data indicates that progress on inflation has stalled or is too slow to bring inflation to 2% in a timely way,” Fed Governor Michelle Bowman said Monday in prepared remarks to a banking conference. Despite considerable progress, she said, “Inflation continues to be too high, and I expect it will likely be appropriate for the (Fed) to raise rates further and hold them at a restrictive level for some time.” Inflation, as measured by the consumer price index, is down from around 9% last year to around 3.7% at last read, slowed at least in part by the Fed’s 5.25 percentage points of interest-rate increases over the last 18 months. The Fed targets 2% inflation.Given that progress, U.S. central bankers last month opted to keep the policy rate in its current 5.25%-5.50% range even as most signaled another rate hike would likely be needed before year’s end. Speaking at a separate event in New York on Monday, Fed Vice Chair for Supervision Michael Barr said he believes rates are now “at or very near” a sufficiently restrictive level.”In my view, the most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals,” Barr said in remarks prepared for delivery to the Forecasters Club of New York. “I expect it will take some time.” Fed Chair Jerome Powell, who on Monday was visiting York, Pennsylvania to get an up-close view of how businesses and workers are experiencing the economy, last month also said restrictive policy would be needed “for some time,” as did the influential chief of the New York Fed, John Williams, on Friday. Meanwhile, speaking Monday evening, Cleveland Fed leader Loretta Mester also said the Fed’s work is likely not done.“I suspect we may well need to raise the fed funds rate once more this year and then hold it there for some time as we accumulate more information on economic developments and assess the effects of the tightening in financial conditions that has already occurred,” Mester said in a speech to a group in Cleveland. Fed forecasts published last month show there is some divergence – though as a group they expect fewer rate cuts next year than they did in June, only a bare majority see rates ending 2024 any higher than 5%, with 9 of 19 policymakers expecting them to be lower.The same Fed forecasts also show policymakers as a group expect stronger economic growth and a stronger job market than they had expected just three months earlier. But they also made only small adjustments to their forecasts for inflation. “The only way to square those would be to have a somewhat higher-for-longer rate path,” Richmond Fed President Thomas Barkin said in an interview on Bloomberg’s “Odd Lots” podcast conducted last Thursday but aired Monday. “I think there is case to be made that the U.S. economy is a lot more resilient than we thought it was, resilient to interest rate hikes, resilient to all the shocks we’ve talked about.” Even so, he said, “One of the things I liked about our posture coming out of the last meeting is that, with demand relatively strong by all accounts, the labor market still relatively strong, and inflation cooling, we have the latitude to say, let’s see how this develops.” More

The officials met with entrepreneurs such as Julie Flinchbaugh Keene of Flinchbaugh’s Orchard & Farm and Jennifer Heasley from Sweet Mama’s Mambo Sauce. The business owners highlighted several issues including unpredictability in business, rising operational costs, inflation, and labor shortages.Jennifer Heasley further elaborated on the impact of high interest rates on her business, stating that these were eroding her profit margins. The tour by the Federal Reserve officials aimed to highlight both the economic successes and the challenges faced in York. These challenges reflected similar issues mentioned in the Beige Book report.The visit to York represents an effort by the Federal Reserve to understand the real-world implications of their monetary policies. By engaging directly with small businesses, they aim to better understand the struggles faced by this sector amidst economic uncertainty.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More