The dollar was trading near one-month lows on Wednesday after more dovish comments from another Fed official further dampened hopes of a rate rise this year. Fed Governor Daniel Tarullo said in a CNBC interview that he does not think it would be appropriate to raise rates given the current economic outlook. Tarullo pointed to the current global disinflationary environment and said that more “tangible evidence” is needed that inflation will return to target.
The dollar remained below the 120 yen level and was trading at 119.71 yen in late Asian session. The euro was back above the 1.14 handle against the dollar, after briefly rising above the level on Tuesday. The single currency stood at 1.1401 against the dollar in late Asian trading, while against the pound, it was steady at 0.7463. Sterling managed to claw back above the 1.52 level against the dollar and was up at 1.5280 dollars, though this was still sharply below Tuesday’s peak of 1.5387.
A bigger-than-expected drop in Chinese inflation added to the risk-off sentiment. The 12-month CPI in China fell to 1.6% in September from 2.0% previously. Estimates for CPI to drop to 1.8% and this heightened concerns about the strength of the Chinese economy.
The Australian and New Zealand dollars recovered some of yesterday’s losses in today’s Asian session. The aussie saw modest gains after falling sharply on Tuesday as the rally in commodity prices came to a halt. Improved Westpac consumer confidence survey for October added some support to the currency. The aussie was up at 0.7226 against the dollar in late Asian trading, having hit a low of 0.7198 at the start of the session.
The kiwi firmed after Reserve Bank of New Zealand Governor Graeme Wheeler refrained from talking down the New Zealand currency at a speech in Auckland. Wheeler said that while recent economic indicators had been more encouraging, “some further easing in the OCR seems likely”. But he also pointed out the risks to the housing market from low interest rates, signalling that rates are unlikely to go much lower. The kiwi bounced from a low of 0.6617 to climb to 0.6686 against the greenback.
Crude oil prices were steadier today after falling sharply on Tuesday following a report by the International Energy Agency that said the oversupply in the market would remain for at least another year. WTI oil futures recovered slightly in late Asian session, rising 0.24% to $46.77.
Coming up later today, UK unemployment figures will be closely watched, particularly average earnings, which have been ticking up in recent months. Eurozone industrial production data is also out today, while over in the US, September retails sales data is expected to be the main focus in US session.