Dollar gains as big banks warn of recession

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Dollar gains as big banks warn of recession

SINGAPORE The dollar was higher on Wednesday after top executives from the biggest U.S. banks warned of an imminent recession, which dampened risk appetite and kept the dollar supported.

The banks are bracing for a worsening economy next year, as inflation threatens consumer demand, according to top bankers from JPMorgan Chase Co, Bank of America and Goldman Sachs.

The sterling fell 0.4 per cent against the dollar, and was last 0.05 per cent lower at $1.2128.

The dollar was up 0.16 per cent against the Japanese yen overnight, but erased some of its gains in early Asia trade and fell 0.04 per cent to 136.97 yen.

Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia said we've been forecasting a recession in the U.S., the euro zone and Japan.

It will provide more support to the U.S. dollar as a safe-haven currency. The U.S. dollar index was last 0.05 per cent higher against a basket of currencies, at 105.60.

It had risen nearly 0.3 per cent overnight, extending a brief rally for a second straight session after upbeat U.S. services and factory data released at the beginning of the week pointed to underlying momentum in the world's largest economy.

The view was supported by the view that the Federal Reserve may scale back the pace of its rate hikes, but the U.S. rates will remain higher for longer.

The euro was 0.13 per cent lower at $1.0460, a 0.13 per cent drop.

Two European Central Bank ECB officials had signalled that inflation and rates could be close to peaking ahead of the monetary policy meeting of the European Central Bank next week.

The Aussie was last 0.16 per cent higher at $0.6699, after a muted reaction after the release of its gross domestic product on Wednesday, which showed that Australia's economy slowed a bit in the September quarter.

After it lifted its cash rate by 25 basis points to a 10 year high, the antipodean currency was buoyed by a hawkish stance from the Reserve Bank of Australia, which signalled more rate hikes ahead to cool inflation.

The kiwi was a 0.02 per cent lower than $0.6317.

China's November trade data is due on Wednesday and is expected to show a further contraction in the country's exports and imports in Asia.

The Asia-Pacific region has waned the exports boom, said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. This adds urgency to China's need to boost domestic demand to compensate for the faltering exports and the still-weak property construction sector, hence the pivot away from zero-COVID. The offshore currency was last marginally higher at 6.9845 per dollar, as a result of the easing of China's strictest COVID 19 restrictions.

Two sources with knowledge of the matter told Reuters that the country may announce 10 new COVID 19 easing measures as early as Wednesday.