October 3, 2023

Brighton Journal

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The Bank of Norway sends the price of the Norwegian krone higher as the dollar seeks direction

The Bank of Norway sends the price of the Norwegian krone higher as the dollar seeks direction

LONDON/SINGAPORE (Reuters) – The Norwegian krone rose from a six-week low against the dollar and the euro on Thursday after the Bank of Norway raised interest rates as expected and said it was likely to do so again in September.

The dollar has been hovering around a two-month high after the Federal Reserve’s meeting minutes left the door open for further rate hikes, and data this week points to resilience in the US economy.

Against the dollar, the Norwegian krone recently rose 0.2% to 10.59, after falling to 10.66 earlier in the session. It rose 0.3 percent against the euro, to 11.51, after touching its lowest level since July 10.

“We don’t see Norges Bank as finished rallying yet, and a September rate hike seems almost certain,” said Nick Riess, FX analyst at Monex Europe. He added that inflation, at 6.4% year-on-year in July, was still very high.

The US Dollar Index is down 0.15% on the day at 103.32, after hitting a two-month high of 103.59.

The dollar got a boost from US economic data which reinforced the view that interest rates will remain high for some time.

Data on Wednesday showed that construction of single-family homes in the United States rose in July and building permits rose ahead, while a separate report said production at US factories unexpectedly rebounded last month.

“We’ve managed to keep the US really resilient, under the weight of higher interest rates,” said Carol Kong, currency analyst at the Commonwealth Bank of Australia (CBA).

In the meantime, she added, inflation — which is stubbornly above the 2% target — would encourage the Fed to “maintain monetary policy at a constrained level.”

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Minutes of the Federal Reserve’s monetary policy meeting in July showed officials were divided on the need for more rate hikes last month, citing risks to the economy if interest rates were pushed too far.

Australian dollars

The Australian dollar stabilized after falling to its lowest level in nine months, taking with it its New Zealand counterpart, on the back of data showing that Australian employment fell unexpectedly in July while the unemployment rate rose.

The Australian dollar was last up 0.15% at $0.6434, after falling more than 0.9% to a low of $0.6365 after the employment data was released.

The weak reading fueled speculation that the Reserve Bank of Australia (RBA) may raise interest rates.

“It’s been done at 4.1% as far as I’m concerned right now, with continued weakness in data from China and mitigation from the (People’s Bank of China) adding to the peak rate situation,” said Matt Simpson, senior market analyst. In City Index.

The New Zealand dollar rose 0.2% to $0.5948, after touching its lowest level since November.

The two opposing currencies, which are often used as liquid proxy for the yuan, have also taken a hit over the past few sessions as a result of the grim outlook on the Chinese economy.

The offshore yuan hit a nine-month low of 7.3490 per dollar, while its internal counterpart weakened similarly to a nine-month low of 7.3180 per dollar.

Elsewhere, the yen rose 0.28% to 145.95 after falling to 146.56 per dollar, its lowest level since November, after it came under renewed pressure as a result of interest rate differentials between the United States and the ultra-low interest rate environment in Japan.

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The Japanese currency is being watched closely since it touched the key 145 level for the first time in about nine months last Friday, and crossed into an area that triggered the intervention of the Japanese authorities in September and October last year.

The euro rose 0.07% to $1.0885, after falling to a six-week low of $1.0862. The British pound rose 0.1% against the euro at 85.35 pence, after jumping to a one-month high on Wednesday on British inflation data.

Despite a sharp drop in Britain’s headline inflation rate, key measures of price growth monitored by the Bank of England (BoE) failed to ease in July, boosting bets that the Bank of England will keep interest rates high for longer.

(Reporting by Joyce Alves in London and Rai Wei in Singapore). Editing by Angus McSwan, Kirsten Donovan

Our standards: Thomson Reuters Trust Principles.

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